Boots Defiant Over Latest Tax Avoidance Accusations

Alliance Boots has challenged claims of tax avoidance regarding its diminutive £2m corporation tax bill, as boss Stefano Pessina stated the group was fully tax compliant and should not have to justify its tax affairs.

The pharmacy giant had reported a 31% surge in net profits to £971m. However, it also reported a global corporation tax charge of just £2m, thanks to a tax credit.

Pessina said: "We do not have to justify ourselves because we could not pay more tax. We respect the law in every single country."

Alliance Boots said it paid £90m (€110.2m, $151.2m) in corporation taxes last year in the UK. This was an increase of £26m on the previous year, and £141m in corporation tax in total.

The finance director, George Fairweather, pointed out that the group had paid around £550m in taxes overall in the UK, factoring in things like business rates and VAT. He added that Boots is in the top 25 tax payers in the UK. "We pay tax in all the countries we trade in and are one of the largest tax payers in the UK," he said.

However, the poverty charity War on Want condemned the payment. Owen Espley at the charity said: "The public expect a company like Alliance Boots, which makes profits from the taxpayer-funded health service, to be paying their fair share of tax. The Government has the powers to stop this kind of abuse, and yet is failing to act."

Boots, which is head-quartered in Switzerland, has regularly annoyed tax equality campaigners over its tax affairs. Last year War on Want made a formal complaint to the Organisation for Economic Co-operation and Development alleging that Boots was not acting within the spirit of British tax laws, a requirement of the OECD guidelines.

During the onset of the credit crisis in 2007, Kohlberg Kravis Roberts & Co LP and Pessina snapped up Boots in a leveraged buyout. Five years later, US drugstore chain giant, Walgreen, bought 45% of the company.

It was alleged that Boots offset taxable income by essentially trading debts between affiliates in a circle with the assistance of private equity firms and other financial vehicles based in places like Luxembourg. It is a fairly common corporate practice to make write-offs in the form of interest on inter-group debts. Boot's alleged debt cycling was mostly opaque but was divined from an analysis of public filings by the parent company and other financial entities.

At the time Boots categorically refuted the allegations, which it said were inaccurate, defamatory, and that it was seeking legal advice on the matter.

War on Want has accused Alliance Boots of avoiding paying £1.1bn in corporation tax since it delisted from the London Stock Exchange in 2008.

Flagging up large UK companies for engaging in egregious - though legal - tax strategies has become a seasoned headline-grabber in the UK. Last year Starbucks earned public rebuke over its tax affairs and quickly ploughed some extra funds into HMRC's kitty. Last week Margaret Hodge MP called on the public to boycott Amazon because it pays a miniscule amount of tax in relation to its gargantuan online takings.