"Merck acknowledges that this agreement was reached as a result of the cooperation and reasonableness of the IRS"
A while back I wrote an article callede "How Multinational Corporations Avoid Paying Taxes."
In this article I wrote, "Merck, one of the largest U.S. drug companies, also this month disclosed that they face four separate tax disputes in the U.S. and Canada with potential liabilities of $5.6 billion. Out of that amount, Merck disclosed that the Canada Revenue Agency issued the company a notice for $1.8 billion in back taxes and interest “related to certain inter-company pricing matters.” And according to the IRS, one of the schemes Merck used to cheat American tax payers was by setting up a subsidiary in tax-friendly Bermuda. Merck then quietly transferred patents for several blockbuster drugs to the new subsidiary and then paid the subsidiary for use of the patents. The arrangement in effect allowed some of the profits to disappear into Merck’s own “Bermuda triangle.” "
I guess Merck just resolved the tax fraud issue related to the U.S., see press release below. Merck's $2.3 billion payment matches the $2.3 billion that disappeared into Merck's own "Bermuda triangle."
Merck Settles Tax Dispute with Internal Revenue Service
Wednesday February 14, 8:30 am ET
WHITEHOUSE STATION, N.J.--(BUSINESS WIRE)--Merck & Co., Inc. announced that it has entered into a definitive agreement to settle its previously-disclosed tax disputes with the Internal Revenue Service (IRS). This settlement resolves all of the issues that were in dispute. The agreement essentially brings to a close the IRS's examination of the Company for the period 1993-2001. Under the agreement, the final net cash cost to Merck is expected to be approximately $2.3 billion which covers federal tax, net interest after federal tax deductions and penalties. The impact for years subsequent to 2001 of the previously disclosed tax disputes is included in the settlement although those years remain open in all other respects.
Merck has previously reserved for these items and this settlement is not expected to have any material impact on the Company's annual earnings for 2007.
The Company concluded that given the theoretical amount in disagreement, it was in the Company's best interests to reach this settlement so as to remove the uncertainty and cost of potential litigation. Merck acknowledges that this agreement was reached as a result of the cooperation and reasonableness of the IRS and the Company.