Tuesday, September 12, 2006

Bet This Smarts

Ahhh, yes. Transfer pricing. Now there's something you can have a little fun with. At least until you get caught. Washington Post (09.12.06):
"Drug maker GlaxoSmithKline Holdings Inc. has agreed to pay the Internal Revenue Service $3.4 billion to settle claims that it underpaid U.S. taxes since 1989 by in effect shifting profits abroad. The payment will be the largest the IRS has received to settle a tax dispute, the agency said yesterday." Glaxo To Pay IRS $3.4 Billion
"At issue was one of the thorniest concerns facing tax collectors -- how multinational corporations apportion profits and expenses among units in different countries. The IRS has said that companies often manipulate cross-border transactions to minimize taxes." Really? In determining a particular apportionment, companies can factor "such intangible items as the value of trademarks and brand names" into the calculation. Not like your accountants would get creative or anything, eh? How good was Glaxo's case? Ha! You make the call. The Independent (09.12.06):
"The drug maker said it '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'." GlaxoSmithKline pays $3.1bn to settle US tax dispute
Yeah, sure. Glaxo was dead in the water on this one.


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