Alliance Boots hits back over tax payments in UK

Alliance Boots, the wholesale pharmaceutical and retail health and beauty retail giant, has launched a vigorous defence of its UK tax payments.

The Switzerland-based company, which operates the Boots chemist chain, was forced repeatedly to answer questions on tax yesterday, as it unveiled a surge in trading profits to more than £1bn, on revenues that smashed the £20bn barrier for the first time.

The protest group UK Uncut targeted the group's flagship Boots store on London's Oxford Street in January, but Stefano Pessina, the executive chairman of Alliance Boots, said: "I couldn't care less. Because I know they are wrong."

Alliance Boots – which was taken private in a £11.4bn deal with KKR, the US private equity giant, in June 2007 – paid a total of £240m tax in the UK last year, comprising corporation, business rates and employment-related taxes, such as national insurance.

The group forked out £59m on corporation tax last year on pre-tax profits of £637m – equivalent to a tax rate of only 9 per cent – but said, as an international company, it did not disclose how much corporation tax it payed in the UK or other individual countries.

An exasperated Mr Pessina said: "We don't distribute hundreds of millions [of pounds] to KKR or myself. We have invested almost £1bn in our stores and people in the past four years. We would accept any criticism if we were using the money to create wealth. We are not putting the money into accounts in Swiss banks."

George Fairweather, the group's finance director, said that Alliance Boots, which is based in the low-tax Swiss canton of Zug, did pay its corporation tax in the UK. He said: "I don't understand why a number of people are picking on us."

The group said its UK tax charge would actually have been higher at £290m, if it had not pumped £246m into its pension fund in the past year, of which £50m was tax deductible. Like many other companies, Alliance Boots replaced its final salary pension for existing employees with a defined contribution scheme in July 2010.

For the year to 31 March, the company's trading profits rose 14 per cent to £1.05bn, boosted by improved trading margins and cost control. Its total revenues were up 15 per cent to £20.2bn, of which its wholesale pharmaceutical division accounted for more than two-thirds with £13.9bn. This division was boosted by two big acquisitions in Turkey and Germany last year and Mr Pessina said: "We have a good pipeline of potential deals."

In the UK, where it has 2,472 Boots health and beauty stores, trading profits were up 5.3 per cent at £713m. However, underlying retail sales at Boots UK only grew 1.2 per cent, reflecting the tough consumer environment.

Asked about Alliance Boots floating in the next two years, Mr Pessina said it was a decision for KKR. But added: "I would say that for the next two to three years they will be happy to stay with us, with this company as it is now." The group slashed its net debt by £546m to £7.84bn last year.

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