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GSK Applauds U.K. Tax Breaks

Pharmaceuticals: Firm pins investments to a tax break on intellectual-property-generated profits

by Rick Mullin
December 6, 2010 | A version of this story appeared in Volume 88, Issue 49

Credit: GSK
Credit: GSK

British drug giant GlaxoSmithKline says the U.K.’s planned “patent box,” a significant tax reduction on profits generated from intellectual property registered in the U.K., will allow it to move ahead on about $780 million in investments in the country. The company also says it will launch an $80 million venture capital fund for early-stage health care companies if the provision is successfully implemented.

The patent box is part of a U.K. economic growth package announced by George Osborne, chancellor of the exchequer. Osborne has said the reduction from the current 28% tax rate to 10% will take effect in 2013.

“For GSK, the successful introduction of the patent box will enable us to increase investment in communities where we have existing facilities by scaling up current manufacturing and building a significant new plant,” GSK CEO Andrew Witty says.

Specifically, GSK says implementation of the scheme will secure investment in a facility in Ware, England, that manufactures high-tech inhalation devices for asthma and lung disease drugs. Current sites in Montrose, Scotland, and in Ulverston and Barnard Castle, England, will be given priority in the company’s site selection process for new biopharmaceutical plants.

The tax break will also lead to the construction of a green chemistry technology facility at England’s University of Nottingham, a continuous-process tablet plant in Ware, and a topical-drug products plant in Barnard Castle.

The new venture fund, which will operate within the company’s corporate venture capital arm, SR One, will focus on British start-up health care companies and spin-offs from U.K. universities. GSK says its new investments in the U.K. could lead to 1,000 new jobs.

U.K.-based AstraZeneca says it would also increase its investment in the U.K. if the tax break is implemented. Not everyone is welcoming the patent box, though. “Our analysis suggests that the policy will lead to a large reduction in U.K. tax receipts,” says the U.K.-based Institute for Fiscal Studies. The group adds that the tax break “will add complexity to the tax system, and it is far from clear that any additional research resulting from the policy will take place in the U.K.”



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