Thursday, August 23, 2012

Glaxo SmithKline doth speak with forked tongue

A year or so ago we gushed about some wonderful words from Andrew Witty, the boss of GlaxoSmithKline, who had just made some fabulous general comments about tax avoidance:
one of the reasons we've seen an erosion of trust , broadly, in big companies is they've allowed themselves to be seen as detached from society" says Witty, "and they will float in and out of societies according to what the tax regime is.

I don't buy that you can be this mid-Atlantic floating entity with no allegiance to anybody except the lowest tax rate."
Powerful, and excellent, words. We hadn't investigated GSK's tax affairs at the time, but now David LeLoup in the Belgian mangazine LeVif/L'Express has done some probing. It turns out we shouldn't have been quite so gushy.

The main story is about how the GSK Group used Belgium as a tax haven to avoid tax on over a billion Euros in royalties linked to GSK's worldwide sales of the swine flu vaccine Pandemrix in 2009-2011. In a nutshell, these royalties were taxed at less than 3%, thanks to two Belgian fiscal measures: first, a 80% deduction on royalties earned by the company, and second, the so-called "notional interests", a Belgian tax specialty.

More generally, these two "fiscal gifts" helped GSK (through its Belgian subsidiary GSK Biologicals) to deduct €2.6 billion from its profits before tax between 2008 and 2011, and thus legally avoid 892 million euro of taxes in Belgium on worldwide sales of vaccines (H1N1 + others)


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