Saturday 21 September 2019

IDA and Finance move against 'brass plate' pharma inversions

Irish-based firms exploiting US tax loophole 'provide no economic benefit'

Not a fan: IDA Ireland chief executive Barry O'Leary
Not a fan: IDA Ireland chief executive Barry O'Leary

Roisin Burke

The IDA and the Department of Finance have voiced concerns about global pharmaceutical companies shifting their headquarters to Ireland to protect cash piles from US tax, as controversy around the practice grows.

A major trend known as inversion, it involves multinational companies with billions' worth of revenue relocating to Ireland and other countries in a bid to slash their tax rate.

The Department of Finance is actively looking at ways to discourage inversions involving this country.

This week Pfizer announced that it would move its tax domicile to Britain as part of its £60bn (€73bn) takeover of AstraZeneca, becoming the latest in a series of US multinationals to relocate for tax reasons.

Government authorities in the US are increasingly critical of inversion, with the US Treasury saying that it raises "significant policy concerns" and US President Barack Obama announcing a crackdown on inversions by the end of this year.

The IDA, the body charged with bringing foreign direct investment into Ireland, is not a fan.

"IDA Ireland is in the business of attracting companies that provide real economic impact to Ireland," chief executive Barry O'Leary told the Sunday Independent on Friday.

"As we've said for many years, 'brass-plate' operations provide no real economic benefit – we want companies that are going to provide jobs and investment."

The Department of Finance has also voiced strong objections to the practice, with a department spokesman saying that while it was encouraging to see substantial Irish companies involved in high-profile transactions in the current economic environment, there are concerns.

"Some of the stories involved are real green shoots for the economy and sectors.

However, in relation to transactions that may not involve real substance in terms of jobs and investment in the Irish economy, the department has concerns and is examining ways to discourage such transactions without damaging legitimate business activity," he said.

"In general, our understanding is that such transactions are driven by push, rather than pull, factors – ie tax issues in other jurisdictions rather than Ireland."

Last year Perrigo, a massive maker of over-the-counter drugs sold worldwide, bought Ireland-based Elan Pharmaceuticals in a $8.6bn (€6.2bn) deal and reincorporated in Ireland as New Perrigo. However, top management and primary operations remain back in the US.

The global headquarters of Endo International, a generic medicines maker, is being set up in Dublin.

Dozens of other pharma companies are also relocating for tax reasons.

Inversions are created when a US company with global operations merges with an Irish (or other nationality) company and re-domiciles in Ireland. It then lends to the US, creating tax-deductible interest payments to reduce tax liability back in the US.

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