Merck: Business as usual.
Recently, Merck's Chief Executive Officer Richard Clark told the Wall Street Journal that the company was "very conservative" in its tax practices. He also claimed that he was not concerned with the company's potential liabilities, given Merck's financial results, stressing: "I don't lose any sleep over that."
Today, Merck said it faces as much as $5.6 billion in tax liabilities from the U.S. and Canada stemming from four "disputes."
And of course this once powerful and respected drug giant wrote in a regulatory filing that it disagrees with the proposed "adjustments." In fact, a Merck spokesman said that the company believed the disputed transactions are in "full compliance with IRS rules" and that it plans to contest the matter.
In one dispute with the Canada Revenue Agency, Merck has been asked to pay an addition $1.8 billion (U.S.) in taxes and interest, related to certain intercompany pricing matters.
What is that, you may wonder?
Oh, it is the beautiful world of a global business. You see, if a company doesn't want to pay tax in a particular market, like Canada, they simply charge their affiliate in Canada transfer prices for the drugs they sell that are so high that most of the local profits conveniently "disappear."
And then this profit instead lands in corporate tax havens like Ireland. Which is one reason so many pharma companies are building factories on the Green Island.
But apparently, finally, the Canadians got fed up. I just wonder how long it will take for the rest of the world to wake up.