Which ones? Pfizer, Lilly and AstraZeneca. And the State Tax Inspectorate maintains all three may be costing Lithuania’s treasury 29 million Euros, or more than $39 million annually. The controversy stems from an audit, since 2005, that concluded the drugmakers’ Lithuanian branches, which are supposedly limited to marketing, were in fact engaged in trading activities, and therefore should be taxed on products sold.

“Activity of some undertakings in Lithuania is not limited to marketing functions alone, i.e. the collected data shows that in fact, trading activity is also in place,” Darius Alinskas, the STI’s Deputy Head, tells The Baltic Times. “During the tax audit, evaded taxes shall be estimated and sanctions anticipated in tax laws shall be applied, i.e. surcharges for late payment and respective fines.”

While the STI is not allowed to comment on which specific companies it says were involved, the marketing branches of Eli Lilly, Pfizer and AstraZeneca have come forward to say they’ll fight the STI’s demands that they pay. “We don’t sell medicines,” sniffs Saulius Sabunas, general director for AstraZeneca’s Lithuanian branch, “we sell ideas.”

“We know we can defend our case. They (tax authorities) have the wrong address. We are good corporate citizens and will continue this way,” says Pfizer’s Luxembourg General Manager Raimundas Voihska….

He argues that the drugmakers are exempt from sales tax because they’re not involved in sales, only in marketing products. “It’s totally nonsense. Which law have we broken? They want to show power and repatriate money. They believe at this rate, they can reduce prices in the pharmaceutical market.”

AstraZeneca’s Alinskas also maintains the STI audit figures are incorrect by about half. “Following calculations, we can make a conclusion that branches of foreign pharmaceutical undertakings – while concealing their factual trading activity – could have evaded up to 50 million of tax per year,” he says.