In a so-called tax inversion a new Irish company is created at the top of, for example, the Pfizer-Allergan, corporate structure.
Instead of global profits being liable for tax at the 35pc US rate, they can be taxed at our 12.5pc rate.
But the devil is in the detail. Currently, as a US resident Pfizer pays tax at 12.5pc on its Irish profits, and because its global profits are taxed at 35pc is also liable to pay the difference between the Irish and US rates to the American authorities - not the full 35pc. Once it becomes an Irish company the opposite happens.
Pfizer will still pay 35pc tax on US profits, and be liable for its global taxes here. However, because US tax has already been charged at a rate higher than ours (as will French, UK and almost all other national tax rates), under double taxation rules Irish authorities regard the tax as paid. The US's loss, doesn't really become Ireland's gain.