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Novo Nordisk in tax bust up with Danish tax authority as the company accused of channelling billions to tax havens

Sunday, 09 June 2013
The Danish tax authority is seeking Dkr5.5 billion in additional tax from healthcare company, Novo Nordisk. The grounds for that is accusation that the company has been channelling unaccounted amounts of money abroad to tax havens. Novo however has rejected accusation.

According to media reports in Denmark, referring to confidential tax documents, obtained on Sunday by Danish Television, experts describe its content as aggressive tax planning and the use of tax haven, Switzerland as a place where Novo Nordisk hid and manipulated taxes many years ago.

The Danish pharmaceutical giant is reported to have manipulated its returns on sales, many years ago on its drugs, haemophilia drug known as NovoSeven and growth hormone drug, Norditropin. Even though the products were developed and produced in Denmark,  billion of revenue ended up in its subsidiaries in Switzerland - far outside the reach of the Danish tax authority.

Danish television exposed the tax saga on its investigative program 21Søndag saying it is in possession of confidential tax documents showing that the Danish Tax authority is about to crack down on Novo Nordisk's transactions with the Swiss subsidiaries.

The pharmaceutical giant's Danish income should show a total of Dkr 22 billion higher than Novo Nordisk have presented,  the tax authority  believes, report Danish television DR1.

Thus, the Danish Treasury missed at least some  Dkr5.5 billion due to Novo Nordisk's Swiss tax manoeuvre. The Danish taxman now needs the money, according to the documents.
"It is a huge case, definitely a case of the absolute top," says Lars Kiertzner, associate professor and expert in accounting and auditing.

Novo Nordisk recognizes that there are some cases that could be answered but rejects the idea that things are have not been done properly.

"That's right, we have cases running with the tax authorities, and we have always had. When you are a globally company operating sales in more than 100 countries, you will always have cases running with the tax authority. We have tax issues in Denmark and we have cases in the rest of the world. But it is not an indication that we are in any way cheating on taxes," says CFO Jesper Brandgaard to Danish Television.

According to Danish media reports, it is not illegal to move patents and product rights to Switzerland. However, the company has a duty to ensure that there be an appropriate market value of the products so they can be taxed correctly when they leave Denmark. In the case of Novo Nordisk, the company products registered with the subsidiary, according to the Tax authority, was priced at values too low to the tax authority.

According to Danish television, Novo Nordisk's relocation of the patents in their research shows how Novo Nordisk on several occasions - and silently - moved a number of its most valuable patents from the parent company in Bagsvaerd, Denmark to the Swiss subsidiaries, among other things, to mane savings on its Danish taxes.

The first movement happened in 2002 when Novo Nordisk moved patent for haemophilia drug NovoSeven. In 2004, the company moved the patents of the company's hormone replacement therapy and in 2006 and 2007 its has been moving patents for growth hormone, Norditropin.

The tax authority has specifically targeted the movements of patents for Norditropin in 2006 and 2007, according to the tax authority; the drug could be priced at Dkr6.8 and Dkr10.8 billion respectively higher than Novo Nordisk property.

With such movements, Novo Nordisk has moved its entire so-called Biopharmaceuticals division to Switzerland. The division had a turnover last year of Dkr17 billion and total revenue since 2007, when the move was completed, was Dkr85 billion.
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