MERCK FACES POTENTIAL TAX LIABILITIES OF $5.58 BILLION IN U.S., CANADA

Merck recently disclosed four tax disputes that could cost the company $5.58 billion. The company plans to contest the claims from the IRS and the Canada Revenue Agency (CRA), which it disclosed in a Nov. 7 quarterly filing with the SEC. The issues come from an IRS review of Merck's tax returns for the years 1993 to 1996 and a CRA review of Canadian tax returns for 1998 to 2004.

Whatever the results of the disputes, they will not have an adverse effect on the company's financial position, Merck said. As of Sept. 30, the company had $15.22 billion in assets, according to the filing.

One of the IRS disputes relates to a partnership transaction from 1993 that allowed Merck to shift taxable income to a UK bank without experiencing the financial loss of shifting comparable book income. The IRS is asking for $2.3 billion to cover taxes from 1993 to 2001, and could impose penalties on years after 2001, according to the SEC filing. The two other IRS disputes came from minority interest equity financing, one from 1995 and the other from 2000.

The CRA's claim for $1.76 billion dollars is related to "intercompany pricing matters," the filing said.