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GSK Refutes BBC's Panorama Tax Allegations

by Jason Gorringe,, London

16 May 2012

UK pharmaceutical giant GlaxoSmithKline (GSK) has denounced the portrayal of the company's tax affairs in the BBC's Panorama programme as "extremely misleading and lacking in context".

The programme, broadcast on May 14, 2012, investigated the company's use of corporate structures in Luxembourg to reduce its exposure to corporate tax in the United Kingdom. However, in a statement issued shortly after the programme was aired, the firm stated that "selective use of facts led to a misrepresentation of GSK’s actions and a failure to recognize GSK’s significant UK tax contribution".

According to Panorama, GSK used interest payments paid on loans from Luxembourg subsidiaries, which, it was said, was effectively taxed at less than 1%, to reduce its UK income tax bill by GBP34m (USD54m). "The company puts its money into Luxembourg and borrows it back. It just sends money round in a circle and picks up a tax break on the way," the BBC’s Darragh MacIntyre said.

In its defence, the company underscored that: “GSK is a global company with 95% of its sales outside the UK; however 20% of the company’s tax bill is in the UK. In total, over the period covered in the broadcast, GSK paid around GBP1bn in UK corporation and business taxes, plus an additional GBP1.3bn through income taxes of its UK employees.“

“GSK strongly refutes any allegation of wrongdoing. At all times the company proactively disclosed its tax transactions to the relevant authorities, and both the UK and Luxembourg tax authorities are agreed that GSK paid all the taxes due,” the statement added.

In responding to UK tax policy on the issue, GSK concluded: “The difference between UK and EU laws in this area has always created uncertainty for global organizations like GSK. GSK supports the new Controlled Foreign Company tax rules developed by the UK government related to the taxation of overseas earnings which will provide greater certainty despite the fact that they will increase the company’s UK tax bill.”

TAGS: tax | business | law | international financial centres (IFC) | corporation tax | Luxembourg | United Kingdom | group taxation | tax authority | offshore | multinationals | transfer pricing

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