Revenue rejects settlement offer on €1.64bn Perrigo tax bill

Consumer healthcare group hit with largest tax assessment ever issued by commissioners

Ireland’s tax authorities have rejected an offer from consumer healthcare group Perrigo to settle an outstanding €1.64 billion tax bill.  Photograph: Adam Bird/Bloomberg via Getty Images

Ireland’s tax authorities have rejected an offer from consumer healthcare group Perrigo to settle an outstanding €1.64 billion tax bill. Photograph: Adam Bird/Bloomberg via Getty Images

 

The State’s tax authorities have rejected an offer from consumer healthcare group Perrigo to settle an outstanding €1.64 billion tax bill.

The decision has emerged just days after Perrigo chief executive told analysts for the first time that the company had made an offer to the Revenue Commissioners.

Chief executive Murray Kessler said in the call on Tuesday that “sufficient progress” had been made in discussions with Revenue over several months for Perrigo to “submit a board-approved offer to settle the matter”.

However, in a filing to the US companies regulator, the Securities and Exchange Commission late on Wednesday, the company conceded that the offer had been rejected.

Perrigo said its tax adviser had been told verbally by Revenue on Tuesday “that the written settlement offer would not be accepted as presented and that a formal response would be transmitted in due course”.

“Perrigo will review Irish Revenue’s formal response to Perrigo’s offer when received and expects further discussions and correspondence with Irish Revenue,” the company said.

Litigation

The company said it had first met Revenue officials in mid-March and again in April.

“We strongly believe that Elan Pharma’s tax position is correct and would ultimately be confirmed through judicial process,” the company said. However, it added, it had met the Irish tax officials “in light of the risks and delays inherent in any litigation”.

“ On April 26th, Perrigo, through its tax adviser, made a without prejudice written offer of settlement to Irish Revenue detailing a possible framework for such a resolution, which applied an alternative basis of taxation than the respective positions taken by Irish Revenue in the notice of assessment and by Elan Pharma in its tax returns.”

The disputed tax bill is the second-largest in the history of the State behind only the high-profile Apple case, which was decided by the European Commission.

It relates to the sale by Elan of its intellectual property interests in multiple sclerosis drug Tysabri in 2013 to Biogen for an upfront payment of $3.25 billion and a share of future royalties. That sale took place months before Perrigo bought what was left of Elan.

Tysabri

The dispute centres on Revenue’s decision, following a 2016 audit, to characterise Elan’s sale of Tysabri as a capital transaction, eligible to be taxed at a rate of 33 per cent. The company maintains that the cash received was declared as trading income, taxable at 12.5 per cent.

Although Mr Kessler told analysts that the issue might be resolved this year, Perrigo warned in its filing that there could be “no assurances that any settlement is possible on terms acceptable to Perrigo”.

It said it would vigorously pursue its tax appeal before the Tax Appeals Commission alongside any further settlement discussions.

Resolution of the €1.64 billion overhang on the business is seen as important for Perrigo as it continues its transformation to an over-the-counter consumer-focused group rather than a prescription healthcare business.

Headquartered in the Republic following a corporate inversion that saw it acquire the rump of Elan Pharmaceuticals back in 2013, the bulk of the company’s operations are in north America.

A US-based tax expert, Bob Willens, said in 2019 that that the company might be able to eventually settle for just 10-15 per cent of the €1.64 billion bill – or a figure of €160 million-€240 million.