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news.GlaxoSmithKline has settled its transfer pricing tax dispute with the IRS for $3.1 billion which covers federal, state and local taxes, interest and also the benefit of tax relief on the payments made.
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The settlement covers the dispute for the period 1989-2000, which was due to go to trial in February 2007, and also covers the subsequent years 2001-2005. GSK said that it has made provision for the dispute and the settlement will not have any significant impact on the company's reported earnings or tax rate.
The company said that although confident in the strength of its case, decided to settle in view of the size of the potential financial exposure, as well as the continued level of resource being applied to the case.
The dispute arose from the tax charges relating to profits from Zantac, the gastro-intestinal drug that was the most important product for Glaxo Wellcome, a forerunner to GSK. Although the bulk of the revenue generated by the drug was from the US, GSK argued that it was justified in paying tax outside the US as most of the research and development costs were incurred in the UK.