Eli Lilly Canada faces CRA tax audit over profit margins

The Canada Revenue Agency (CRA) has launched an audit of Eli Lilly Canada, suspecting the pharmaceutical company did not pay sufficient taxes in 2020. According to Federal Court filings, the CRA noted that the firm’s profit margins for that year appeared suspiciously low compared to industry norms.

The CRA alleges that Lilly Canada acquired its inventory from related offshore entities, primarily located in Ireland, which is a low-tax jurisdiction. This has raised concerns regarding potential transfer pricing issues, as the company’s margins were reportedly below those typically earned by independent entities involved in the marketing and distribution of pharmaceutical products.

Eli Lilly, the manufacturer of medications such as Mounjaro, Prozac, and Cialis, has stated it disagrees with the CRA’s characterizations. A company spokesperson, Ethan Pigott, noted that the firm is confident in its position and intends to respond formally through the court process. The audit is ongoing, and the CRA is currently seeking a court order to compel the company to produce certain documents.