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
"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
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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