Pharmaceutical giant Merck & Co. announced that it would settle a number of tax disputes with the Internal Revenue Service at a net cash cost close to $2.3 billion.
The drug company's payment includes taxes, interest and penalties stemming from the disputes, which cover tax years spanning from 1993 to 2001. The IRS said that the most significant issues resolved were a trio of issues resulting from Merck’s use of minority equity interest financing transactions.
Merck, based in Whitehouse Station, N.J., said that the settlement resolves all of the issues that were in dispute -- though the IRS noted that its examination of years after 2001 remains open.
In November, Merck disclosed that it faced potential liabilities of nearly $5.6 billion from U.S. and Canadian authorities. Merck has said that settling the matter sooner, rather than later, was in the company’s best interests and has already allocated reserves for settlement. The settlement should not have a material effect on the pharm giant’s earnings in 2007.
The resolution is one of the largest achieved in recent years by the IRS through the use of an audit. Another drug company, Glaxo SmithKline, agreed to the IRS’s largest tax settlement ever in September, paying the agency $3.4 billion to end a long-running transfer-pricing dispute.
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