Astra Zeneca has confirmed a better-than-anticipated deal with UK and US authorities to resolve a tax dispute, resulting in a significant increase in earnings targets.

The pharmaceutical giant has agreed to pay £690 million (US $1.1 billion) in tax payments after a long dispute relating to the integration of its US businesses in 2000 following the Astra Zeneca merger of a year earlier.

The company said the payment reflects expected US tax payments and updated estimates of corresponding tax refunds in other jurisdictions. Payment in full will be made this year.

Astra had made provision for the resolution of the dispute, but had set aside a far greater amount than the eventual amount that needed to be paid.

The company said it had additional funds which would now result in a benefit to earnings in the first quarter of approximately £312 million (US $0.5 billion).

As a result of the Q1 provision release and the impact of this settlement on the tax rate in all four quarters of 2011, the group's effective tax rate for 2011 is expected to be approximately six percentage points lower than the previous guidance of 27 per cent, at around 21 per cent.

AstraZeneca has increased its 2011 target for core earnings per share accordingly from US $6.45-$6.75 to US $6.90-$7.20 per share to reflect this revised guidance for the 2011 tax rate.