24/01/22

US: Pharma giant questioned over €1.2bn Irish tax deal.

As published on irishtimes.com, Monday 24 January, 2022.

Pharmaceuticals giant Bristol Myers Squibb (BMS) has been given until Friday by the chairman of the US Senate’s powerful Committee on Finance to respond to a series of questions over its alleged use of Ireland as a conduit to avoid up to $1.4 billion (€1.2 billion) in US taxes.

Democratic Oregon senator Ron Wyden last week wrote to Giovani Caforio, BMS’s chief executive and chairman, with the deadline to respond.

The committee, which also includes firebrand former US presidential contender Elizabeth Warren, is investigating profit-shifting and tax avoidance by US multinationals.

Mr Wyden’s four-page letter says he is seeking information from BMS to ascertain if its Irish arrangement “was used in a in a manner that may have violated longstanding anti-abuse rules in place to prevent the creation of abusive tax shelters”. The pharma giant employs 650 people here at its plants in Dublin and Clare, but it is also believed to have shifted the ownership of many of its valuable drug patents to companies registered here.

Mr Wyden’s letter relies heavily on an April 2021 report by the New York Times, which laid out details of the alleged Irish arrangement, said to have started a decade ago and subject to investigation by the IRS, the US tax authority.

The scheme was allegedly based on the accounting treatment of the amortisation of patent values and tax allowances. It is alleged that BMS used a new Irish partnership to dramatically lower its US tax bill in 2012 to “negative 7 per cent” from a positive rate of 24.7 per cent the previous year.

The BMS scheme, which was signed off by professional services firms PwC and White & Case, was secretly investigated by the IRS several years later, but this only came to light last year after tax authorities inadvertently published online an unredacted document about the case. It is not known what the outcome was or if BMS settled the case.

Mr Wyden’s letter asks eight detailed questions about the scheme, including if it shifted “intellectual property rights for prescription drugs from existing entities in the US and Ireland to a newly created subsidiary in Ireland?”

“Please also describe whether any decision to shift income within partnerships was carried out with the intent to avoid paying US taxes,” he asks.

BMS said last night it had received the senator’s letter and would “co-operate with the committee chairman on his request”.