A High Court judge will give judgment on a later date on a significant action by drug company Perrigo against the Revenue and State aimed at overturning a €1.64 billion tax assessment.

The action, which is being closely monitored by large companies and tax consultants, concluded on Friday after a seven day video-link hearing before Mr Justice Denis McDonald.

The judge said, as a result of having a number of other judgments to write up in earlier cases, he could not give a definitive date for delivery of judgment in this case. Irish-headquartered Perrigo, which bought Irish pharma group Elan in 2013, wants the court to quash the 2018 assessment raised against it after a Revenue audit in 2016.

Assessment

It has separately appealed the assessment to a Tax Appeals Commissioner but says it cannot get a fair hearing of that appeal for reasons including non-availability of documents relating to tax issues over years and the death of Elan CEO Donal Geaney in 2005.

In opposing the judicial review proceedings, the respondents said Perrigo owes the €1.64 billion because of its purchase of Elan in 2013 and the latter’s sale eight months previously of its multiple sclerosis drug, Tysabri to Biogen, its partner in the drug’s development.

Perrigo bought Elan by way of corporate inversion, involving foreign companies reversing themselves into Irish businesses to secure an Irish domicile and lower corporate tax rate. Because Biogen paid for Tysabri with an up-front sum and the promise of future royalties depending on sales, Revenue says it should have been treated as a capital gain, taxable at 33 per cent.

Perrigo treated it as tradable income in its Irish tax return, subject to a 12.5 per cent tax rate, and maintains this is consistent with how Elan reported purchase and sale of Intellectual Property (IP) rights to medicines over years.

Perrigo argued the tax treatment of Elan’s sales of IP over some two decades meant Revenue was not entitled to raise that assessment in 2018 and Perrigo had a legitimate expectation it would not do so.

Expectation

The legitimate expectation claim is based, inter alia, on a Shannon Free Trade Area tax certificate issued to Elan in 2002, backdated to 1997. The certificate expired in 2005 but Perrigo claims it was represented to it that existing certified activities would continue to be treated as they were during the Shannon regime.

It has also alleged unfairness, abuse of power and an unjust attack on its property rights. In closing submissions for the Revenue, Gráinne Clohessy, SC, argued, if Perrigo was correct in its claims, that would “set at nought” the self-assessment system of taxation involving the taxpayer assessing their own tax liability and the Revenue processing returns in a non-judgmental manner.

Such processing does not involve “review” and there was no review by Revenue of Perrigo’s tax treatment of IP disposals until 2016, she said. Perrigo had made “quite extraordinary” assertions that Revenue’s processing of research and development claims amounted to auditing of the applicant’s entire financial statements over some 15 years, she said.

If the applicant considered, had that been done, there would have been “no questions asked”, by Revenue, that amounted to Perrigo “burying its head in the sand”, she said.

Submissions

In their submissions, the respondents disputed the claims of abuse of power or unjust attack on property rights, arguing the right to property is not absolute but can be limited in the interests of the common good.

Perrigo’s rights, it was submitted, are also protected by the statutory right of appeal to a Tax Appeals Commissioner (TAC), which Perrigo has availed of. Paul Sreenan SC, closing the case for Perrigo, said this was the only case where Revenue has “gone back” on a Shannon area tax certificate.

While Revenue said Perrigo “may not have been” uniquely treated, the company says it has, he said.

Perrigo’s sworn evidence to that effect, including from Conor O’Brien, a former head of tax in KPMG, had not been challenged, he said.

Revenue cannot say Perrigo’s rights are protected by the right of appeal to the TAC because a valid assessment is the foundation of any such appeal and this assessment was not valid, he argued. ends