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Lithuania accuses pharmaceutical companies of tax evasion

Multinational pharmaceutical companies operating in Lithuania are in dispute with the Lithuanian State Tax Inspectorate (STI) after it accused them of tax evasion

Multinational pharmaceutical companies operating in Lithuania are in dispute with the Lithuanian State Tax Inspectorate (STI) after it accused them of tax evasion.

The STI has made tax payment demands follows an audit of pharmaceutical companies operating in the country, which concluded that some of their Lithuanian branches, whose activities are supposed to be limited to marketing only, were actively trading and thus should be taxed on products sales.

In an interview with the Baltic times, Darius Alinskas, deputy head of the STI, said: "During the tax audit, evaded taxes shall be estimated and sanctions anticipated in tax laws shall be applied. Although, we would like to underline that the key objective of the Lithuanian Tax Administration is to stop tax evasion and future utilisation of operational models designed for the purpose of tax evasion."

While the STI is not allowed to comment on which specific companies it said were involved, the marketing branches of Eli Lilly, Pfizer and AstraZeneca vowed to fight the STI's demands.

Pfizer Luxembourg's general manager, Raimundas Voihska, said, for example, that the STI was attempting to tax the companies' Lithuanian branch based on sales invoiced by their parent company in Belgium.

Eli Lilly and Pfizer added that they were exempt from the sales tax because they did not sell products in the region, but only marketed them.

General director for AstraZeneca's Lithuanian branch, Saulius Sabunas, also disagreed with the STI: "We don't sell medicines, we sell ideas. It's total nonsense. Which law have we broken? They [tax authorities and the government] want to show power and repatriate money."

Local media reports have estimated the overall amount of taxes the state could be losing each year from tax evasion by the pharmaceutical industry at EUR 29m.

Alinskas was more conservative: "Following calculations, we can make a conclusion that branches of foreign pharmaceutical undertakings - while concealing their factual trading activity - could have evaded up to 50 million of tax per year."

22nd August 2007

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