Thursday, November 26, 2015

26/11/15: On a long enough time line: Irish corporate inversions


Recently, I covered the Pfizer-Allergan ‘merger’ just as Irish media navel gazed into the usual ‘jobs for Ireland’ slumber.  [You can trace much of it from here: http://trueeconomics.blogspot.ie/2015/11/201115-inversion-debate-isnt-over.html]

Now, few links that catch up with my analysis:

  1. Irish Times reported that the Exchequer may gain up to EUR620m in Pfizer’s Allergan deal, annually. Key quote: “Last year, Pfizer paid an effective tax rate of 26.5 per cent as a US company. Post-merger, it expects to pay between 17 and 18 per cent across the group. In Ireland, it will pay our 12.5 per cent tax rate on any international income routed through the new Dublin operation.” Err, Irish Times, no. Pfizer will be paying lower effective rate than 12.5% because it will be able to avail of the famous/infamous OECD-allegedly-compliant ‘Knowledge Development Box’. How much lower? Ah, who knows. http://www.irishtimes.com/business/health-pharma/state-may-gain-up-to-620m-in-pfizer-s-allergan-deal-1.2441324
  2. Bloomberg covers the same deal with a heading: “Pfizer's Viagra Tax Dollars Head to Dublin as U.S. Loses Again”. A bit of a miss, as Ireland already milks Viagra fortunes, though with the new ‘investment’ that will most likely increase. http://www.bloomberg.com/news/articles/2015-11-23/pfizer-s-viagra-tax-dollars-head-to-dublin-as-u-s-loses-again. Key quote: ““We are not pushing for inversions,” Irish Finance Minister Michael Noonan told reporters in Brussels on Monday, referring to the controversial transaction meant to cut corporate tax rates. The agency charged with winning investment for Ireland “never promotes inversions. It’s a decision for the two companies.” While Noonan said Allergan and Pfizer were plainly merging for “tax advantages,” the government has no problem with the deal as both companies had “substantial” operations in Ireland.” You have to be laughing… the same defence [we are not doing anything, all their fault] has been used in the past by Swiss and other tax havens to justify the arrival of tax-‘optimising’ money into the banks vaults. Now, it is Ireland’s turn. But for comical relief, we have this: “Patrick Coveney, chief executive of Greencore Group Plc, the Irish food company that’s the biggest sandwich maker in the U.K., told state-owned RTE Radio in Dublin on Tuesday that Pfizer’s proposed deal builds on its and Allergan’s presence in Ireland.” Yes, sandwich maker knows a thing or two about pharma and biotech. Next up: newsagent comments on new nuclear power plant design in the UK…
  3. Not to be left behind, U.S. politicians are jumping on a carbon copy of the bandwagon too scared to actually join the bandwagon itself. Per Zerohedge: http://www.zerohedge.com/news/2015-11-23/hillary-slams-unfair-tax-inversions-after-sanders-calls-pfizerallergan-deal-disaster “Hillary Slams "Unfair" Tax Inversions After Sanders Calls Pfizer/Allergan Deal "Disaster For Americans”” Apparently, following in the footsteps of the completely out-of-touch Bernie Sanders, Hillary Clinton “firmly believes businesses should get ahead by building a stronger economy here at home, rather than using tax loopholes to shift earnings overseas, or to move abroad to escape paying their fair share.” Hillary went on to do what politicians do best: promise to do something. “In the weeks ahead [no idea when] I will propose specific steps to prevent these kind of transactions… I urge Congress to act immediately [pretty definitive timeframe when urging other to do something though] to make sure the biggest corporations pay their fair share, and regulators also should look hard at stronger actions they can take to stop companies from shifting earnings overseas.” So in basic term, Hillary has nothing to say other than that she has to say something. That’s novel.


All of this would be gas were it not serious. Despite Irish Government promises to curb ‘harmful’ tax practices, despite our vocal ‘compliance’ with the spirit of the OECD ‘reforms’, Ireland remains a premier destination for tax inversions from the U.S. Worse, everyone now knows this, and no one is doing anything about it. Worse, yet, everyone is next going to be aware of the simple fact that no one is doing anything about it.

On a long enough timeline, things will be easier in the short run as Irish Exchequer milks the rest of the world for tax optimising commissions. In the long run… well, we might have to start looking into how we will pay all these future pensions when the penny finally does drop in Washington and Berlin…





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