US drug firm must wait for €1.64bn tax decision

A HIGH Court judge will give judgment on a later date on an action by drug company Perrigo against the Revenue Commissioners and the State aimed at overturning a €1.64bn tax assessment.

The action, which is being closely monitored by large companies and tax consultants, concluded on Friday after a seven-day video-link hearing before Mr Justice Denis McDonald.

As a result of having a number of other judgments to write up for earlier cases, the judge said he could not give a definitive date for delivery of judgment in this case.

Irish-headquartered Perrigo, which bought Irish pharma group Elan in 2013, wants the court to quash the 2018 assessment raised against it after a Revenue audit in 2016.

It has separately appealed the assessment to a Tax Appeals Commissioner (TAC) but says it cannot get a fair hearing of that appeal due to non-availability of documents relating to tax issues over years and the death of Elan CEO Donal Geaney in 2005.

In opposing the judicial review proceedings, the respondents said Perrigo owes the €1.64bn because of its purchase of Elan in 2013 and the latter’s sale eight months previously of its multiple sclerosis drug, Tysabri to Biogen, its partner in the drug’s development.

Perrigo bought Elan in a so-called ‘corporate inversion’, reversing itself into the Irish takeover target to secure an Irish domicile and lower corporate tax rate.

Because Biogen paid for Tysabri with an up-front sum and the promise of future royalties depending on sales, Revenue says it should have been treated as a capital gain, taxable at 33pc.

Perrigo treated it as tradable income in its Irish tax return – subject to a 12.5pc tax rate – and maintains this is consistent with how Elan reported purchase and sale of Intellectual Property (IP) rights to medicines over years.

The firm argued the tax treatment

Perrigo has also appealed the assessment to the Tax Appeals Commissioner

of Elan’s sales of IP over two decades meant Revenue was not entitled to raise that assessment in 2018 and Perrigo had a legitimate expectation it would not do so. The legitimate expectation claim is based on a Shannon Free Trade Area tax certificate issued to Elan in 2002, backdated to 1997.

It has also alleged unfairness, abuse of power and an unjust attack on its property rights.

In closing submissions for Revenue, Gráinne Clohessy SC argued that if Perrigo was correct in its claims, that would “set at nought” the self-assessment system of taxation involving the taxpayer assessing their own tax liability and Revenue processing returns in a non-judgemental manner.