Americans hit GSK with £1.4bn bill for unpaid taxes

GlaxoSmithKline has been slapped with a £1.4bn bill for unpaid taxes by the US government.

GlaxoSmithKline has been slapped with a £1.4bn bill for unpaid taxes by the US government.

The company said yesterday that the Internal Revenue Service, the IRS, claims GSK avoided paying $1.9bn (£1.0bn) of taxes on the profits of drug sales in the US between 1997 and 2000. It is demanding the company pays the bill in full, plus $700m (£380m) in interest.

The claim is the latest in an acrimonious battle between GSK and the IRS, which is already demanding $5.2bn for unpaid taxes and interest in the seven years before 1997.

The issues relate to sales of Glaxo Wellcome drugs, primarily the stomach ulcer pill Zantac, before the company merged with SmithKline Beecham to become GSK. The company argues some of the profits on Zantac sold in the US should be ascribed to subsidiaries in the UK, where the drug was developed. The applicable UK corporate tax rate is 30 per cent, compared with 35 per cent in the US.

In a statement, GSK said it had paid all the taxes it believes were due to the US and would contest the new claim as vigorously as it is contesting the claim over the disputed years 1989 to 1996. It said: "There continues to be a wide difference of views between GSK and the IRS. GSK considers that the additional tax claim by the IRS on Glaxo heritage products is inconsistent with the treatment of other pharmaceutical companies, including the GSK legacy company SmithKline Beecham."

The two sides are due to meet in the US Tax Court in October next year to settle the dispute.

The UK's Inland Revenue was brought in by GSK in 2002 to help resolve the dispute, but talks between IRS officials and the Inland Revenue collapsed after UK officials sided with the Glaxo view that no additional taxes were payable, according to the company's version of events.

Neither the Inland Revenue nor the IRS would comment.