Ottawa seeks $2B in taxes from Merck Frosst: Knowledge Driven Revolution

The federal government is reported to be demanding that Merck Frosst pay $2 billion in unpaid taxes.

La Presse carried a report Thursday citing unnamed sources who said the federal government informed the company earlier this month of the tax bill. Ottawa is said to be seeking some of the company's profits from sales of its Singulair asthma drug.

The drug was developed in Kirkland, Que., but the paper said the company shifted the patent to its affiliate in Barbados.

Canada Revenue Agency is going after a portion of the income from sales through the affiliate because Barbados doesn't collect taxes on pharmaceutical royalties.

La Presse said the cost to Merck could climb if the government of Quebec chooses to try to get its share of unpaid taxes, which could add up to another $1 billion.

A company spokesperson declined to comment to the paper. Vincent Lamoureux said communications between Merck Frosst and Revenue Canada are confidential.

Merck is facing a tax fight with the U.S. Internal Revenue Service. In late September, the Wall Street Journal reported that the IRS is challenging the company over $1.5 billion US in taxes it cut from its bill over 10 years by shifting patents to Bermuda.

Shortly after that report, Merck said in a U.S. regulatory filing that the IRS had informed it that it won't allow royalty-related expenses Merck claimed on its taxes between 1993 through 1999. That could lead to the company being forced to pay a total of $2.3 billion US in taxes.

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Ottawa seeks $2B in taxes from Merck Frosst: report