AstraZeneca, a global drug company with its headquarter in London, has reached an agreement with U.S. and U.K. tax regulators to pay $1.1 billion for tax issues that have been going on in the last decade.
AstraZeneca will pay the settlement in 2011 to resolve all transfer pricing issues in the United States. The payment is much less than what was determined in provisions. In fact, this good news raised AstraZeneca's 2011 core earnings to be $6.90 to $7.20 a share. This payment will cause AstraZeneca's effective tax rate this year will be some six percentage points lower than thought at about 21 percent." (FYI, the statutory corporate tax rate is 35%.)
According to this New York Times article,
Transfer pricing concerns the price at which one unit of a group sells goods or services to another unit of the same group. Such practices are receiving increased attention as tax authorities around the world seek to limit any abuse of intracompany transfers of expenses or profits.
This is another interesting article about big corporates with tax issues. As an accounting major, I find transfer pricing to be a very subjective practice where GAAP recognizes the importance of different transfer pricing methods due to different industry standards. I find it amusing when U.S. government goes after corporates for tax issues because SEC's current accounting rules have too many loopholes that it seems silly if people don't take advantage of them.
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