Discovery set to cut tax burden with Irish set-up
$20bn-rated American media giant to become latest big player to establish here?
US global media giant Discovery Communications – which owns channels including Discovery and Animal Planet – is understood to be engineering a plan to reduce its tax burden through new firms it has established in Ireland.
The news comes as a number of newly merged, multi-billion-euro pharmaceutical groups shift their bases to Ireland to shrink their tax liabilities and other multinationals consider doing the same.
A unit of Discovery, which is one of the biggest companies in the US with a stock market capitalisation of close to $20bn (€15bn), has just established two companies in Ireland.
A director of both companies – DNI Holdings 1 and DNI Holdings 2 – is Jared Dunkin, who is Discovery's senior director of global tax planning.
The shareholder in DNI Holdings 1, according to company filings, is Luxembourg-based Discovery Luxembourg Holdings. That is in turn controlled by Discovery Foreign Holdings, based in the US, according to company filings.
Last year Discovery generated revenue of $4.48bn, up from $4.16bn a year earlier. Its operating income rose to $1.85bn from $1.8bn. Its 2012 annual report shows that the company's effective tax rate that year was 37pc, and it paid $562m in income tax. The previous year, its effective tax rate was 27pc and it paid $427m in income taxes. The US government levies a 35pc corporate tax rate, compared to 12.5pc in Ireland.
Discovery's effective tax rate in 2011 was much lower due to foreign tax credits totalling $112m that it received that year.
The company added in its report: "Due to the lower statutory and negotiated tax rates in the foreign corporations' jurisdictions, the company expects a favourable impact on the effective tax rate in the future under the new operating structure."
A spokeswoman said she could not comment.
A move by Discovery to use Ireland to lower its effective tax rate comes after similar decisions by other companies.
US drug firm Perrigo, which has recently agreed to buy Irish pharma group Elan, will domicile the new enlarged group here. Perrigo's current effective tax rate is about 28pc, but following the move to Ireland it will drop to around 17pc within 12 to 18 months. The company said it could go even lower in future as it channels international interests through Ireland.
New Jersey drug firm Actavis is moving to Ireland following its $5bn acquisition of Warner Chilcott. That will also lower its effective tax rate to 17pc.