SHANGHAI May 19 A Chinese state-run newspaper
has accused British drugmaker GlaxoSmithKline Plc of
evading at least 100 million yuan ($16.04 million) in taxes,
adding to pressure on the firm which is already struggling with
graft charges against executives.
Chinese police on Wednesday said they had charged the former
boss of GSK's China business and other colleagues, in the
biggest corruption scandal to hit a foreign company there since
four Rio Tinto executives were jailed in 2009.
Although the corruption charges target executives rather
than the company itself, the mounting allegations made by
Chinese media suggest the drugmaker is far from safe.
The Legal Daily newspaper, run by the ruling Chinese
Communist Party's Political and Legal Committee, reported on
Friday that GSK intentionally imported Lamivudine, used to treat
HIV as well as hepatitis, at an elevated cost.
Along with using tax loopholes for charitable donations,
this helped GSK "avoid over 100 million yuan in import
value-added tax and corporate income tax," the report said.
The report followed less-detailed allegations by state news
agency Xinhua saying GSK used transfer pricing to artificially
reduce its profits and tax bill in China.
GSK officials in Shanghai and London declined to comment,
despite repeated phone, text and email requests from Reuters
since Friday. The drugmaker said on Wednesday that the graft
charges were "shameful" and that it hoped to reach a resolution
to enable it to continue serving Chinese consumers.
Chinese police charged Mark Reilly, the former British boss
of GSK's China business, and other colleagues with corruption
last week, after a 10-month probe found the firm made billions
of yuan from elaborate schemes to bribe doctors and hospitals.
The allegations against GSK have damaged its reputation and
led to an overhaul of operations in what is set to become the
world's second-biggest pharmaceutical market behind the United
States within three years, according to consultancy IMS Health.
The Legal Daily report also said that GSK had avoided import
taxes by donating some of the imported drug to support
state-backed treatment of the disease, adding GSK could have
donated cheaper drugs that it produced at a plant in Suzhou
"The most serious thing is that through this sham charity,
GSK blocked the Chinese government making its own generic drugs
to treat AIDS, so that it could attain a monopoly over the
hepatitis drug market," the Legal Daily said.
Xinhua also reported earlier that GSK had spent tens of
millions of yuan to bribe hospitals to use Lamivudine after it
lost patent protection in 2010.
Legal sources and one source with direct knowledge of the
GSK investigation have said that Chinese authorities may be
looking to charge the company itself, which could put the
drugmakers license to operate in China at risk.
($1 = 6.2334 Chinese Yuan)
(Reporting by Adam Jourdan in SHANGHAI, Sui-Lee Wee and Xiaoyi
Shao in BEIJING; Editing by Michael Urquhart)