Drug company Perrigo has lost its High Court action aimed at overturning a €1.64 billion tax assessment.
Mr Justice Denis McDonald concluded in a 155 page judgment today that Perrigo had failed to establish any basis for the court to interfere with the assessment, issued in respect of the disposal of the Tysabri IP and accordingly, its claim must be dismissed.
He stressed that the question of whether the disposal of the Tysabri IP constituted a trading or a capital transaction is a matter that will have to be resolved in due course before a Tax Appeals Commissioner.
Implications beyond Perrigo
The action was brought by the Irish headquartered company against the Revenue Commissioners and the State. It was closely monitored by large companies and tax consultants because of its potential implications beyond Perrigo.
Perrigo, which bought Irish pharm group Elan in 2013, wanted the court to quash a 2018 assessment raised against it after a Revenue audit in 2016. It has separately appealed the assessment to a Tax Appeals Commissioner but maintains it cannot get a fair hearing of that appeal for reasons including non-availability of documents relating to tax issues over years and the death of Elan CEO Donal Geaney in 2005.
The Revenue and State argued Perrigo owes the €1.64 billion 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.
Elan deal
Perrigo bought Elan by way of corporate inversion, involving foreign companies reversing themselves into Irish businesses 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 33 per cent.
Perrigo treated it as tradable income in its Irish tax return, subject to a 12.5 per cent tax rate, and argued that was consistent with how Elan reported purchase and sale of Intellectual Property (IP) rights to medicines over years.
Perrigo argued the tax treatment of Elan’s sales of IP over some 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 was based, inter alia, on a Shannon Free Trade Area tax certificate issued to Elan in 2002, backdated to 1997.
The certificate expired in 2005 but Perrigo claimed it was represented to it that existing certified activities would continue to be treated as they were during the Shannon regime.
The Revenue argued, if Perrigo was correct in its claims, that would "set at naught" the self-assessment system of taxation involving the taxpayer assessing their own tax liability and the Revenue processing returns in a non-judgmental manner. The Revenue and State disputed Perrigo’s additional claims of abuse of power or unjust attack on property rights, arguing the right to property is not absolute but can be limited in the interests of the common good.
