Retail pharmacy giant Walgreens Boots Alliance owes $2.7 billion in unpaid taxes

The US Internal Revenue Service (IRS) is pressing retail pharmacy giant Walgreens Boots Alliance for $2.7 billion in unpaid taxes, citing alleged transfer pricing discrepancies, the company revealed in recent filings. The demand stems from a Revenue Agent’s Report (RAR) issued by the IRS last quarter, following an audit of Walgreens Boots Alliance's tax years from 2014 to 2017.

Walgreens Boots Alliance, the parent company of well-known retail pharmacy chains Walgreens in the US and Boots in the UK, disclosed the IRS's claim in filings initially reported by Bloomberg on April 1. According to the filings, the IRS is pursuing an additional $2.7 billion in taxes along with penalties and interest.

However, Walgreens Boots Alliance is pushing back against the IRS's assertions and plans to challenge certain disputed issues. A spokesperson for the company stated, "The company intends to vigorously defend its position on the TP matter through the IRS’s administrative appeals office and, if necessary, judicial proceedings, and is confident in its ability to prevail on the merits."

The company maintains that its reserves for uncertain tax positions are appropriate based on the technical merits of its tax positions as of February 29, 2024. Moreover, Walgreens Boots Alliance asserts that it applied the same valuation method to certain purchase options for both US generally accepted accounting principles and federal income tax purposes.

External experts reportedly reviewed these valuations, leading the company to believe it will ultimately succeed in the audit process.

Despite its confidence, Walgreens Boots Alliance anticipates a potentially lengthy ordeal, with the audit possibly lasting between two to seven years, according to the spokesperson. This development adds Walgreens Boots Alliance to a list of major corporations embroiled in tax disputes with the IRS.

Notably, last year, the IRS made headlines by claiming that tech giant Microsoft owed $28.9 billion in back taxes for the period between 2004 and 2013, primarily focusing on transfer pricing issues. Additionally, the IRS announced in October last year its intention to send compliance letters to foreign companies reporting losses or low margins related to their US activities.

Experts from accounting firm Crowe suggested that more transfer pricing compliance actions from the IRS could be on the horizon, underscoring the increasing scrutiny faced by multinational corporations regarding their tax practices.

By fLEXI tEAM