Alliance Boots has avoided paying £1.1bn worth of corporation tax since 2008 after a consortium led by a private equity group took the company private six years ago.
According to a report by Britain's largest trade union Unite and anti-poverty group War on Want, after Boots delisted from the London Stock Exchange, the pharmacy chain stuffed itself with loans from affiliates from low tax jurisdictions.
While tax avoidance is entirely legal, and Boots has not been accused of any illegal activity, the groups have called for the government to made a change to tax planning law so big corporations pay more tax.
"Ministers have allowed corporations such as Boots and its private equity owners to abuse the UK's tax system. It is time for proper rules to make companies like Boots pay their fair share," said John Hilary, executive director at War on Want.
Boots, Europe's largest pharmacy chain, said in a statement that "Alliance Boots conducts its business and organises its tax affairs strictly in compliance with all applicable law (including legislation in the UK) and observes the highest standard of good ethics."
Tax Doesn't Have to Be Taxing
During the onset of the credit crisis in 2007, Kohlberg Kravis Roberts & Co. L.P. (KKR) and the drug distributor's billionaire executive chairman Stefano Pessina snapped up Boots in a leverages buyout deal.
Five years later, US drugstore chain giant, Walgreen, bought 45% of the company.
However, the report shows that before Boots went private, it had a £181m UK tax expense but, since going private, rising interest payments turned healthy operating profits into tax losses.
This resulted in only a cumulative net tax credit of over £130m.
According to the co-author of the report, a researcher at Change to Win, Neil Geiser, by the consortium loading Boots up with loans from the affiliates it sent interest costs soaring to £853m in 2008, the year after the acquisition.
This is compared to £42m in the year to March 2007.