Alliance Boots, the private equity owners of the UK’s best-known pharmacy brand which is now 45% owned by the US Walgreen chain, has come under attack again from the War on Want charity and Change to Win about how much tax it paid on some debt deals and its overall financial positioning.
The UK pharmacy and drug-maker chain was brought for £12bn in 2007 by KKR and executive chairman, Stefano Pessina. In common with many other private equity deals Alliance Boots was promptly moved offshore to a low or no tax country, in order to reduce its costs, recoup the outlay, and sweat it for profit. Similar tax structure moves by Starbucks, Google, Amazon and others attracted negative publicity this time last year and the issue of treasury and corporates’ tax optimisation programmes only seems to have grown throughout the year.
The tax efficiency moves at Alliance Boots has saved the firm many millions, says the ‘FT’ newspaper in its coverage of this story, but the corporate counters that it is doing absolutely nothing wrong and indeed has invested more than £2bn into the business and £1bn into its pension pot. The charities have returned to the attack, however, over a series of transactions involving a Luxembourg-based finance company, Dascoli, which has overseen the purchase of £220m of Alliance Boots’ debt below price and its subsequent liquidisation at a profit, reducing overall debt – a practice that War on Want and Change to Win say breaks Organisation for Economic Co-operation and Development (OECD) guidelines.
According to the charities when Alliance Boots repurchased the debt recently, most of the benefit of its rise in value may have gone to entities controlled by CEO Pessina. “Transactions were structured in such a way that they may have significantly enriched those connected with the entities at the expense of the company and taxpayers”, claimed the charities in a statement, but this has been rejected by a counter-statement from Alliance Boots calling the allegations “inaccurate” and potentially “defamatory”.
UK trade union, Unite, previously accused Alliance Boots of avoiding £1bn in corporation tax during an October offensive against the company, which has become a target for campaigners mainly it seems due to its history as a firm founded by philanthropic Victorians.
The updated OECD guidelines cited by the charities were introduced in 2011 and some campaigners use them to try to hold companies to account over their tax affairs, but the stipulations are voluntary and no laws have been broken in this case.
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