Tax resolution boosts profits of AstraZeneca

 
Julian Harris
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A TAX dispute between the US and UK authorities over pharmaceutical giant AstraZeneca was resolved yesterday, boosting the company’s profit outlook for the year.

In London, shares in the company rose as the news broke yesterday, yet slipped back during the day, to close 0.05 per cent down.

“It is a windfall and the market doesn’t want to put a price-to-earnings ratio on a windfall that is not part of the operating business,” said Panmure Gordon analyst Savvas Neophytou, who nonetheless rates the stock as a “buy”.

The settlement will see AstraZeneca pay $1.1bn (£688m) to resolve all US transfer pricing issues from 2000 to the end of 2010.

The company, which underwent a global merger in 1999, had made provisions of $2.3bn in its 2010 accounts.

AstraZeneca’s effective tax rate for 2011 will be around six per cent lower than previously expected, at around 21 per cent, it said in a statement.

Transfer pricing concerns the price at which one unit of a group sells goods or services to another unit of the same group.