AstraZeneca cures US tax headache
AstraZeneca's long-running dispute with US authorities over its tax liabilities was resolved today at a cost of $1.1 billion (£690 million) - an amount that allowed investors to breathe a sigh of relief.
The drugs giant formed from the merger of Sweden's Astra and the UK's Zeneca in 1999 has agreed to pay that amount to resolve "transfer pricing" issues.
Transfer pricing refers to how multinationals allocate profits between different countries, in this case whether it should be paying tax on assets in the UK or the US.
The company first approached the taxmen in 2004 seeking clarity.
That $1.1 billion is less than half what it had set aside, giving it a painless boost to earnings this year. It will release some of the excess straight away, adding $500 million to first-quarter profits.
The deal sees its tax rate for 2011 fall from 27% to 21%.
AstraZeneca has also reached agreement with the US tax authorities on a related valuation matter arising on integration of its US businesses in 2000 after the 1999 merger of Swedish group Astra and British company Zeneca.
AstraZeneca employs more than 67,000 people worldwide, including 11,000 in the UK, where it has sites at Macclesfield and Wilmslow in Cheshire, Luton, Loughborough, Edinburgh, and Brixham in Devon.
AstraZeneca shares were one of the biggest gainers on the FTSE 100 in early trading. Later they were up just 0.9p at 2899.9p, which values the business at £40 billion.
The firm made a profit of $11 billion in 2010.
