Stefano Pessina, the executive chairman of Alliance Boots, was defiant in the face of criticism yesterday over paying just £2m in corporation tax.
The pharmacy giant posted net consolidated profit up 31 per cent to £971m and underlying profits up 18.5 per cent to £840m for the year to April. However, due to a tax credit, it reported a £2m global corporation tax charge, down from £96m.
Mr Pessina said Alliance shouldn’t have to explain itself: “We do not have to justify ourselves because we could not pay more tax. We respect the law in every single country.”
He added that it had actually paid £90m of corporation tax in the UK, up £26m on the previous year, and £141m in corporation tax in total – an increase of £27m.
The finance director, George Fairweather, also pointed out that the group had paid around £550m in taxes overall in the UK, such as business rates.
However, the poverty charity War on Want condemned the payment, arguing that £90m tax on UK profits of £900m was an effective tax rate of just 10 per cent. Owen Espley at the charity said: “The public expect a company like Alliance Boots, which makes profits from the taxpayer-funded health service, to be paying their fair share of tax. The Government has the powers to stop this kind of abuse, and yet is failing to act.”
The group, which is based in Switzerland, offset tax against its cost of debt. It cut its net debt by £842m to £5.05bn, but its finance costs rose to £387m.
Mr Pessina and the US private equity group KKR took the group private in a £12bn deal in 2007 and sold a 45 per cent stake to the US drugstore Walgreens in a £10bn deal nearly two years ago. The US group is expected to complete the deal to buy the remainder next year – netting Mr Pessina and his shareholders billions.
Alliance Boots said the benefits of the Walgreens deal were ahead of target and it is increasing the brands it sells in the US and overseas.
Mr Pessina said the group plans to become the “clear world leader in both retail pharmacy and pharmaceutical wholesaling” and will continue expand globally including in Latin America and China.