6th Feb 2015 12:48
LONDON (Alliance News) - Shire PLC on Friday was accused of tax avoidance by the UK's Public Accounts Committee as part of a damning report issued by the committee into the role played by Big Four accountancy PricewaterhouseCoopers in helping its clients avoid paying tax.
The PAC said the evidence submitted to its investigation into PwC failed to convince it that the schemes the accountancy has promoted to its clients constituted anything other than the promotion of tax avoidance "on an industrial scale".
It said the UK government and tax collector HM Revenue & Customs need to take a more active role in regulating the tax industry and said HMRC needs to do more to challenge the nature of the advice given by accountancies to their clients.
As part of the investigation, evidence was submitted regarding arrangements put in place by PwC on behalf of Shire involving the incorporation of an entity in Luxembourg.
The evidence found Shire employs only two people to cover the seven companies it has incorporated in Luxembourg. Those two individuals are responsible for managing intra-company loans of around USD10 billion, which Shire used to shift profits to Luxembourg. The company was found to have paid an effective tax rate of only 0.0156% on the profits shifted to Luxembourg.
The PAC questioned the substance of Shire's business in Luxembourg and said neither Shire nor PwC was able to provide any evidence to suggest the Luxembourg business was created for any reason other than avoiding tax.
"Unless HMRC takes urgent action, this irresponsible activity will go unchecked, causing harm to both the public finances and the reputations of the companies involved," said Margaret Hodge, the committee chair.
Shire moved its tax domicile to Dublin, Ireland, in 2008 to take advantage of its lower corporate tax rate. At that time it said the move was to help protect its "taxation position," and that it believed that the "most appropriate structure is for the new group parent company to be tax-resident in the Republic of Ireland."
Shire became a takeover target last year after it received a GBP32 billion takeover offer from US drugs-maker AbbVie Inc in a so-called 'tax inversion' deal. Many US companies were looking to acquire companies overseas and re-domicile in an effort to avoid the high US corporate tax rate, which is more than double that of Ireland, and nearly double that of the UK.
However, the deal with AbbVie fell through after US authorities cracked down on the practice, introducing new measures to make such deals less appealing. This included a ban on companies using foreign cash without paying US taxes. At the time, AbbVie said that the breadth and scope of the changes had introduced an "unacceptable level of uncertainty to the transaction".
"Shire has always and will always comply fully with all of our tax obligations in jurisdictions in which we operate. A key goal for any company, including Shire, is to try to manage tax affairs in a way that minimises uncertainty and allows effective and stable planning for the future," a Shire spokesperson said in a statement.
"We consider effective and lawful management of our tax affairs to be an appropriate and responsible part of our drive for efficiency and re-investment into research and development of innovative medical treatments," the spokesperson added.
Shire shares were down 1.3% to 4,889.00 pence on Friday morning, one of the worst performers in the FTSE 100.
By Sam Unsted; [email protected]; @SamUAtAlliance and Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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