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Merck

Merck set up offshore accounts to avoid U.S. taxes; settles with IRS for $2.3 billion

Monday, February 26, 2007 by: M. T. Whitney
Tags: Merck, the IRS, drug companies


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(NewsTarget) American pharmaceutical giant Merck & Co. for years held offshore accounts in Bermuda to hold patents for two of its drugs, and then used the royalties from these patents as tax deductions in the United States.

On Wednesday, the company agreed to pay $2.3 billion to the Internal Revenue Service, settling a three-year tax evasion dispute.

Jump directly to: conventional view | alternative view | bottom line

What you need to know - Conventional View

• The settlement is the second-largest ever for the IRS. The first? British pharmaceutical company GlaxoSmithKline settling for $3.4 billion.

• The Merck settlement was significantly less than the $3.8 billion the IRS was seeking, but it avoids a lengthy tax fraud lawsuit.

• The tax shelter Merck set up in the Bermudas for its subsidiary company meant the company was essentially deducting money used to pay itself.

• The drugs involved were Zocor and Mevacor, both extremely popular and profitable drugs for cholesterol.

• Merck reported $22.6 billion in sales for 2006, and said it does not expect its bottom line to be affected by the settlement.

• Merck & Co. is an American company with German origins – Merck came from Germany, but was seized by the United States and forcibly split from its parent company at the end of World War I.

• "Generally, a settlement is safer for both sides than rolling the dice," Martin G. Laffer, a certified public accountant, told the L.A. Times newspaper. Laffer often testifies in tax fraud cases.

What you need to know - Alternative View

Statements and opinions by Mike Adams

• In addition to being sued by the IRS, Merck has been sued by tens of thousands of consumers over its anti-inflammatory drug, Vioxx. Merck is also the company behind the Texas HPV vaccination scheme that seeks to profit from injecting teenage girls with medically unnecessary pharmaceuticals.

• "It is curious that Merck, one of the wealthiest corporations in the world, would go to such lengths to avoid paying taxes in the United States. If there is any one industry that can clearly afford to pay its fair share of taxes, it's the pharmaceutical industry." - Mike Adams, author of Natural Health Solutions and the Conspiracy to Keep You From Knowing About Them

Bottom line

• Merck used a questionable tax shelter, and paid out $2.3 billion to settle a lawsuit from the IRS.

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