GSK pays ‘biggest tax settlement in US history’

In what has been described as the biggest tax settlement in US corporate
history, GlaxoSmithKline said it had agreed to settle its $3.4bn (£1.8bn)
transfer pricing tax dispute with the Internal Revenue Service.

GSK will pay the Internal Revenue Service the huge figure, and will abandon
its claim seeking a refund of $1.8 billion in overpaid income taxes, as part of
an agreement to resolve the parties’ long-running transfer pricing dispute for
the tax years 1989 through 2005.

The settlement covers a dispute that ranges from 1989-2000, but GSK had made
provision for the dispute and it does not expect the settlement to have a
‘significant impact’ on the company’s reported earnings or tax rate.

‘GSK was confident of the strength of its position, but in view of the size
of the potential financial exposure, as well as the continued level of resource
being applied to the case, GSK concluded that it was in the best interests of
its shareholders to reach this settlement, thereby removing the costs and
uncertainty of future litigation,’ the company said in a statement today.

‘We have consistently said that transfer pricing is one of the most
significant challenges for us in the area of corporate tax administration,” said
Mark W Everson, commissioner of Internal Revenue.

‘The settlement of this case is an important development and sends a strong
message of our resolve to continue to deal with this issue going forward.’

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