Drugs group Perrigo has filed for judicial review of a Revenue decision that landed the company with one of the biggest tax bills in corporate history.
The €1.64 billion Revenue assessment, the second largest in Irish history after the Apple case, relates to a dispute over the amount of tax paid on the sale by Elan of its stake in a major drug in 2013, the multiple sclerosis drug Tysabri.
Perrigo bought Elan eight months after the company had sold the Tysabri intellectual property.
The company said the cash received was declared as trading income, taxable at 12.5 per cent in line with long-standing practice at Elan. Revenue argues that Elan was liable at the capital gains tax rate of 33 per cent as the sale was not part of its normal trading activity.
Perrigo said it filed for judicial review in the High Court “based on a breach of Elan Pharma’s legitimate expectations as a taxpayer”. The proceedings are against Inspector of Taxes John McNamara, the Revenue Commissioners, the Minister for Finance and Ireland and the Attorney General.
Constitutional right
Perrigo says it believes a tax assessment issued last November for the year 2013 is incorrect as a matter of law. It claims the amended assessment is so unfair it amounts to an abuse of power, breaches Perrigo’s legitimate expectation and constitutes an unjust attack on, and an interference with, the firm’s constitutional right to property.
“Following a detailed review of the facts, we feel strongly that Elan Pharma, predecessor to Perrigo, had a legitimate expectation, based on an approximate 20-year history of tax filings in relation to the company’s trade in intellectual property, that Irish Revenue would not, many years later, recharacterise that trade and issue an assessment in this manner,” said Murray Kessler, chief executive and president of the company, which specialises in over-the-counter medications.
“We will continue to vigorously defend our position on behalf of our shareholders.”
The company had already lodged a tax appeal with Revenue ahead of a December 27th deadline. That process will now be paced on hold pending the judicial review.
Perrigo, a US-based company, is tax resident in Ireland as a result of the 2013 purchase of Elan, a corporate inversion deal that saw its tax domicile move to the republic.
The ex-parte (one side only represented) application for leave for judicial review came before Mr Justice Seamus Noonan on Monday who granted leave. He returned the matter to April.
Several US law firms are planning class actions against Perrigo over the timing of the announcement. They argue that the company misled investors in its an regulatory filing on November 8th last where it first disclosed the existence of an audit finding letter from the Irish tax authorities without disclosing material details associated with the letter.
Shares in Perrigo fell close to 30 per cent when the news broke on December 21st.
The deadline for shareholders who bought shares between November 8th and December 21st to act is March 4th.
