Pharma giant Abbott using Irish ‘single-malt’ scheme to avoid tax on profits

Abbott, the international pharmaceutical giant, is using elaborate tax structures in Ireland and Malta to lawfully avoid hundreds of millions of euro in tax on profits from Covid test kits, according to an analysis of its company structures and published accounts by the charity Christian Aid.

The company makes use of a tax structure apparently similar to the “single malt” which the Irish Government said it was abolishing two years ago.

The company books profits from around the world in its Irish companies before transferring them to Malta where it can avoid tax by the use of a complex system of allowances and intercompany transfers, Christian Aid says.

In a statement, Abbott said it complied with “all applicable local and international tax laws and regulations, including in Ireland, Malta and developing countries”.

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“Abbott has never used the single-malt structure that was eliminated by the Irish and Maltese governments in 2019,” it said.

However, the examination by Christian Aid suggests that the company is using similar structures involving Maltese companies.

Rapid tests

In a detailed examination of company filings and structures, Christian Aid outlines how Abbott acquired Alere Inc, a company that produces rapid tests for various diseases, and reorganised its corporate structure, setting up Irish and Maltese subsidiaries to facilitate the transfer of intellectual properties rights and global profits between them. The Irish companies are incorporated here but are tax-resident in Malta.

The single malt was utilised by multinational companies after the Irish Government, following significant international pressure, announced the end of the “double Irish” in 2014. This was another scheme by which companies were able to shift profits through Ireland to avoid paying tax on them.

‘Tax-treaty abuse’

The Government said that it was shutting down the single-malt structure in 2018 through an agreement with the Maltese government. Minister for Finance Paschal Donohoe said it would "significantly reduce opportunities for tax-treaty abuse including bringing about the end of the so called single-malt structure."

Sorley McCaughey, head of policy at the charity, said that the tax avoided by Abbot “should really be paid in some very poor countries, already struggling to deal with the impacts of the pandemic on their overwhelmed health systems and struggling economies.”

Accounts are only available for part of 2019, which saw the company sheltered profits of €62 million from tax. However, because of the pandemic and the demands for testing kits, the company is likely to have seen its profits in these subsidiaries – which are earned all over the world – rocket.