With an agreement to make payments totaling $750 million over the next five years, Teva can wipe its slate clean of litigation from Israeli regulators that concerns over a decade's worth of taxes.
The agreement will put to rest disputes with the Israel Tax Authority over taxes payable from 2008 to 2020. The company will pay the $750 million in installments through 2029.
In addition, if Teva were to pay dividends on or repurchase its own shares in the future, the company would pay an extra 5% to 7% of the amount of those dividends or repurchases in corporate taxes, up to roughly $500 million.
“This allows Teva to end this historical tax issue, and to continue its focus on its commitment to the health of patients and on the continued implementation of its 'Pivot to Growth' strategy,” the Israel-based drugmaker said in a press release. The deal “has no impact” on Teva’s financial projections for this year, Teva said.
The company is “deeply committed to the State of Israel and the Israeli ecosystem and is proud of its contribution and role in the country's economy,” it added in the release.
Teva’s tax issue with its home country stretches back more than a decade. The company enjoyed a privileged tax status for years before 2014, when public criticism led to the end of its tax-free arrangement. Still, after that, the drugmaker continued to benefit from a lower corporate tax rate because of policies meant to boost capital investment in Israel.
In 2019, Israel’s tax authority looked to demand more than 1 billion shekels ($271 million at the time) in retroactive taxes for 2014 to 2015. That scrutiny came after former CEO Kare Schultz’s massive 2017 restructuring campaign prompted large-scale strikes in the country to protest the planned layoffs in Israel.
Even further back in 2013, the company agreed to fork over 2.5 billion shekels (around $718 million at the time) to settle years of issues over back taxes.
While it may have finally closed the book on its Israel tax litigation, the drugmaker is still working to whittle down its debt, which totaled $19.6 billion as of March, and recoup from years of declining sales.
CEO Richard Francis’ “Pivot to Growth” strategy involves leaning on innovative medicines while expanding Teva's pipeline and sustaining its generics business with “high-value opportunities.”
The plan appears to be coming along, as Teva enjoyed a 6% sales increase in 2023 to $15.8 billion. This year, Teva expects its annual revenues to come in between $15.7 and $16.3 billion.