A new report, Alliance Boots & the Tax Gap unveils for the first time the full extent of tax avoidance by the multinational pharmacy-led health and beauty group.
The report reveals that the group has avoided at least £1.12 billion tax since going private six years ago.
The anti-poverty charity War on Want says this is enough to pay for two years’prescription charges in England, the starting wages of 78,000 nurses or 5.2 million ambulance calls.
The Unite union, War on Want, and the Change to Win federation of US trade unions have caledl on Alliance Boots to disclose its tax returns and shed light on its web of debt strategies.
The three organisations are calling for action from the UK Government to modernise the outdated tax system, which allows companies to manipulate their profits to avoid taxes, and to make transparent, significant public contracts through which major corporations profit from the public purse. They call for:
- Alliance Boots to disclose key tax and financial information;
- an investigation into Alliance Boots’ tax practices;
- modernisation of taxation of private equity-backed businesses;
- reform of taxation in British Overseas Territories;
- transparency and accountability for public contracts undertaken by private companies.
Alliance Boots draws an estimated 40 per cent of its UK revenues – £4 billion – from prescriptions and related services, mainly paid for by the UK’s taxpayer-funded National Health Service.
The company is seeking to expand into medical services traditionally supplied in hospitals, family doctors’ practices and community health clinics, largely paid for by public funds.
According to the report, the company went into massive debt to fund its 2007 buyout and is likely to have apportioned this liability to reduce its corporation tax by about 95 per cent over six years.
The transaction was led by US private equity firm Kohlberg Kravis Roberts & Co. LP. and the company’s billionaire executive chairman Stefano Pessina, who lives in tax-free Monaco.
Several Pessina and KKR-related entities with stakes in Alliance Boots operate in other tax havens, such as Luxembourg and the Cayman Islands.
In 2008, Alliance Boots relocated to the low-tax canton of Zug, Switzerland, even though the company generates no revenue there. The holding company that owns Alliance Boots is located in Gibraltar. Now the firm’s private equity backers are selling Alliance Boots to the US pharmacy chain Walgreens, standing to make over 200 per cent profit on their investment, says War on Want.
Nell Geiser, Associate Director of Retail Initiatives at Change to Win, called for action to eliminate the ways in which companies can avoid tax: "After avoiding hundreds of millions in UK tax through massive borrowing, Alliance Boots’ private owners are selling out and stand to profit handsomely.
"Corporate tax avoidance is not going away unless we shine a light on it and unless policy makers act decisively. This is an international issue but our report gives the UK government every reason to act more forcefully to limit abuses by private equity backed firms like Alliance Boots."
* Read the full report, Alliance Boots & the Tax Gap: The Case for Corporate Tax Reform (*.PDF Adobe Acrobat document) here: http://www.waronwant.org/attachments/AllianceBoots%20Tax%20Gap.pdf