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The government awards contracts to companies with histories of misconduct such as contract fraud and environmental, ethics, and labor violations. In the absence of a centralized federal database listing instances of misconduct, the Project On Government Oversight (POGO) is providing such data. We believe that it will lead to improved contracting decisions and public access to information about how the government spends hundreds of billions of taxpayer money each year on goods and services. Report an instance of misconduct »

GlaxoSmithKline

Interest Payment Deduction Stemming from 2000 Merger

Date: 03/04/2009 (Date of Annual Report)

Misconduct Type: Tax

Enforcement Agency: Treasury – IRS

Contracting Party: None

Court Type: Administrative

Amount: $0

Disposition: Pending

Synopsis: The IRS is seeking $1.9 billion in back taxes, interest and penalties from GlaxoSmithKline for allegedly improperly deducting interest payments to its parent company. The company is accused of “earnings stripping,” a process in which a company reduces its taxes by deducting interest paid to another unit overseas. The action stems from the merger of GlaxoWellcome and SmithKline Beecham in 2000, when GlaxoWellcome created a Swiss company to serve as the parent to its U.S. division, which merged with SmithKline’s U.S. division. SmithKline’s U.S. operation agreed to pay $13.5 billion to the Swiss parent of GlaxoWellcome, and GSK deducted part of those payments from its taxes.