RBC backs Perrigo over €1.6bn tax demand

Perrigo has repeatedly argued it will defend its position in the tax case, and denies Elan underpaid tax on the Tysabri deal

North American stockbroking analysts have predicted that drugs giant Perrigo has an 80 per cent chance of a "favourable outcome" to the company's €1.6 billion Irish tax demand.

Perrigo has sought a High Court judicial review of the tax bill, the second largest in Irish history, which was levied by the Revenue Commissioners over the tax paid by Irish company Elan – later bought by Perrigo – on the 2013 sale of a multiple sclerosis drug Tysabri.

In a note last week to the investment bank's clients, RBC Capital Markets, a division of Royal Bank of Canada, cited research on the case from high-profile US tax expert Bob Willens.

According to RBC, Mr Willens told it that Perrigo has a four in five chance of an “eventual favourable outcome”. RBC said the High Court decision on the judicial review was “12-15 months away”.


He said the company had a greater than 50/50 chance of winning the court case on its “legitimate expectations” argument, which holds that because Revenue had not challenged the way Elan’s accounts were compiled for years it created an expectation that cannot be reversed.

Even if Perrigo loses, RBC and Mr Willens said the case goes back to an Irish tax appeals commission.

“[That] could take years with appeals. Settlement potential is real and [Willens] believes it could happen at 10-15 per cent of ask,” said RBC of Mr Willens’s estimation. This means he expects that Perrigo may eventually settle the case with Revenue for about €240 million.

Perrigo has repeatedly argued that it will defend its position in the case, and denied Elan underpaid tax on the Tysabri deal.


Elan paid tax on the proceeds of the transaction as if it was trading income, at the rate of 12.5 per cent. The State argues that the cash should have been declared as capital gains, taxable at 33 per cent.

Last month Perrigo filed a judicial review against inspector of taxes John McNamara, the Revenue Commissioners, the Minister for Finance and Ireland and the Attorney General.

In its filings it argues the tax assessment is so unfair it amounts to an abuse of power, breaches Perrigo’s legitimate expectation and constitutes an unjust attack on, and an interference with, the firm’s constitutional right to property.

Perrigo bought Elan eight months after the Tysabri deal in a tax-fuelled so-called “inversion” deal, where a foreign company buys an Irish-registered one, and then shifts its headquarters here to avail of the 12.5 per cent tax rate.

Perrigo was unavailable for comment on Wednesday night. The RBC analysts had not responded to requests for comment.

Mark Paul

Mark Paul

Mark Paul is London Correspondent for The Irish Times