Ireland is "not a brass-plate location" for companies moving their residency for tax purposes and the Government has told the US it has never been a supporter of controversial corporate inversions, Taoiseach Enda Kenny said yesterday.
Responding to new rules issued by the Obama administration to crack down on tax avoidance by US firms, Mr Kenny said Ireland was a place where “real companies employ very significant numbers of people”. “As for the American government, we have never been a supporter of tax inversions and we have made that point to them. That is a matter entirely for the government here,” he said.
His comments came as more than $12 billion (€9 billion) was wiped off the shares of almost a dozen firms considered candidates for inversions – a practice that sees US groups acquiring smaller foreign rivals and relocating their corporate headquarters to those countries to avail of lower corporate taxes.
‘Magically’ Irish
Two months after President Barack Obama castigated US firms for “gaming the system” and becoming “magically” Irish by taking over companies in Ireland, his administration is introducing rules to impose higher taxes on inverting businesses to make the deals less attractive, bypassing political stalemate on the issue in Congress.
The tighter rules will force “inverted” companies to pay more US taxes if less than 25 per cent of their business is in the corporate home country of the new parent or if the shareholders of the old US firm own at least 60 per cent of the new foreign parent. For some companies considering inversions, the rules will mean inversions “no longer make economic sense”, the US treasury said.
Burger King, in the process of being taken over by Tim Horton's, said it would complete the $11 billion deal regardless of the restrictions. But pharmaceutical firm Pfizer fell as investors believed the rules might deter it from making another attempt to acquire AstraZeneca.
Shares in AbbVie, another drug company, and Irish-based rival Shire also declined as the crackdown was seen as posing fresh risks to the completion of their inversion deal.
Loophole exploitation
The changes, announced by US treasury secretary
Jack Lew
, will make it more difficult for the inverted company to access money outside the US without paying American corporate taxes. “We’ve recently seen a few large corporations announce plans to exploit this loophole, undercutting businesses that act responsibly and leaving the middle class to pay the bill . . .” Mr Obama said last night. “I believe that America does better when hard work pays off, responsibility is rewarded and everyone plays by the same set of rules.”
The takeover by Minnesota medical device maker Medtronic of Covidien in Ireland, along with other corporate inversions, sparked outrage in Washington, stirring economic patriotism as Mr Obama labelled inverted companies "corporate deserters" for moving overseas.
Republicans want limits to be introduced to reduce the US corporate tax rate of 35 per cent, while more critical Democrats want to halt US companies relocating overseas.
