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GSK defends UK tax record after BBC investigation

Television documentary claims the UK-based pharma company arranged secret deals in Luxembourg

GSK - logo on building

GlaxoSmithKline has refuted claims it avoided paying the correct level of corporation tax in the UK after a BBC documentary suggested the company had cut secret tax deals with authorities in Luxembourg.

The BBC's Panorama programme said it obtained documents indicating the pharma company dodged paying millions of pounds in corporation tax in its home country, which had a 28 per cent tax rate at the time the deals were made.

The documentary said that GSK had set up a new company in Luxembourg, which lent another GSK subsidiary £6.34bn in 2010 and that this was followed by interest payments of £124m from the UK subsidiary to the Luxembourg business, effectively removing the money from UK-based profits so it did not have to be taxed in the country.

Instead, the money was taxed in Luxembourg, where GSK had been able to negotiate a tax rate of less than 0.5 per cent, meaning the company only had to pay £300,000 rather than the £34.72m it would have paid if the money had remained in the UK.

In a statement, GSK defended its actions, which have been described as “absolutely, without a shadow of a doubt, legal” by tax expert Richard Murphy and author of www.taxresearch.org.uk. 

The company said: “GSK is very disappointed with this programme which was extremely misleading and lacking in context. Specifically, the programme's selective use of facts led to a misrepresentation of GSK's actions and a failure to recognize GSK's significant UK tax contribution.

“GSK strongly refutes any allegation of wrongdoing. At all times the company proactively disclosed its tax transactions to the relevant authorities and both the UK and Luxembourg tax authorities are agreed that GSK paid all the taxes due.”

GSK, whose CEO Sir Andrew Witty received a knighthood earlier this year, also described the “uncertainty” in the difference between UK and EU laws regarding corporation tax for global companies such as GSK, which has 95 per cent of its sales outside its home country.

In addition, according GSK, over the period covered in the broadcast, it paid about £1bn in UK corporation and business taxes, plus an additional £1.3bn through income taxes of its UK employees.

Since 2010, the UK corporation tax rate has dropped to 24 per cent in a bid from the UK government to attract business to the UK, with plans to cut it to 22 per cent by April 2014.

15th May 2012

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