The problems surrounding transfer pricing are not limited to internal decisions. Companies transfer prices can have huge implications well beyond departmental profits including significant tax implications.

In September 2006, the U.K. based pharmaceutical giant, Glaxo SmithKline (GSK) settled an ongoing dispute with the U.S. Internal Revenue Service. In doing so, GSK agreed to pay \($3.4\) billion in back taxes and interest. This was the largest single tax dispute in U.S. history.

Required:

Research the GSK dispute and write a two-page memo summarizing the central issues of the dispute. Include in your summary the position of each side (IRS and GSK) as well as GSK’s explanation for the settlement and any impact on company shareholders.