Alliance Boots, the owner of Boots the chemist, has avoided £1.1bn in taxes by routing its cash through a series of subsidiaries in well-known tax havens including Luxembourg, Cayman Islands and Gibraltar, according to a new report.
The campaign groups War on Want and Change to Win and the Unite union have calculated that the company saved the money by loading the UK business with debts from its £12.2bn private purchase in 2007 and legally claiming tax relief against the interest.
The campaigners claim that 40 per cent of Boots’ sales come from NHS-funded services such as prescription drugs and flu jabs – and called on the Government not to hand contracts to companies that do not pay their fair share in tax. The pharmacy giant rejected the report’s findings and said it is one of the most transparent private companies in the world. Only 25 per cent of sales came from prescriptions and similar business, it added.
Last year, Alliance Boots’ sales hit £22.4bn with underlying profits reaching £805m. However, the company paid just £114m in tax, including £64m in the UK, up £31m on the previous year. In the UK, under the Boots brand where it has 2,000 stores, sales were £6.55bn.
Its executive chairman, Stefano Pessina, who is based in Monaco, has defended the company’s tax position. He pointed out that it paid more than double the amount of tax that it did as a quoted company before 2007 and said taxes such as national insurance and business rates meant its tax bill was far higher. He said: “We’re much more than a cash cow – we’re like a whale. Every time a whale feeds its baby it gives it 50 litres of milk. We’re like a whale for the Government.”
Mr Pessina engineered New York private equity group KKR’s acquisition of Boots in 2007 when he was the company’s deputy chairman and loaded the company with huge debts. The group paid £12.4bn to take the FTSE-100 company private, in the largest private equity deal ever seen.
In order to pay for the deal, KKR and Mr Pessina borrowed more than £9bn from a series of banks, switched the company’s head office overseas and legally claimed tax allowances against interest paid on the debt, which it is still paying off.
A spokeswoman for Alliance Boots said: “It is extraordinary and disappointing that this organisation has not at any stage contacted us during the preparation of their report or subsequently. We have published a detailed Annual Report on our website containing comprehensive information on both our tax charge and tax paid. In recent years this has included details of our tax charge and tax paid between the UK and other countries in line with evolving best practice.”