The signs are that inviting taxes won't be enough to keep key assets in Ireland, writes Arthur Beesley

At the start of a frantic round of meetings in New York on Wednesday before St Patrick's Day celebrations in Washington, Bertie Ahern spoke at a breakfast for senior figures in the financial services industry.

As the Taoiseach sold the Irish story, he made a point of saying international banks hold assets of more than $500 billion (€377.82 billion) in Ireland and that $1.3 trillion in assets are administered here by investment funds.

At a lunch that day in Chicago, Brian Cowen drove home the message. Like Ahern, the Minister for Finance cited low corporate taxes as a crucial element in the Irish mix. "US firms operating in Ireland benefit from a low and transparent corporation taxation regime with profits taxed at 12.5 per cent."

Nothing new in all that, you might think. But the courtship of international investment from the very top of the Government is enough to illustrate its importance at a time when global organisations are retrenching at the cost of thousands of jobs in Ireland. As Ahern's figures demonstrate, boomtime Ireland has received an impressive flow of assets and investments from international organisations.

Tax is a big factor - for some, the only factor - but the exchequer takes its reward. According to the Taoiseach, the corporate tax yield in 2006 from Irish Financial Services Centre (IFSC) companies was the equivalent of $1.45 billion (€1.1 billion).

Yet while Ireland has received a huge share of inward investment, informed high-level business sources in Dublin say some international groups are examining in great detail the possibility of transferring assets resident in Ireland to other jurisdictions to reduce their tax exposure.

Low corporate tax has been considered the trump card here for many years, so such a development could represent a threat to Ireland's allure.

This comes amid moves by groups as disparate as Bristol-Myers Squibb, Coca-Cola Hellenic Bottling Company, building materials giant Holcim, Banco Santander, Pepsi Bottling Group, Pfizer and Cable & Wireless to liquidate Irish assets worth hundreds of millions of euro and, in one case, several billion. Voluntary liquidations of this nature can facilitate the transfer of assets to a more tax-friendly jurisdiction, although some of the groups say they were not motivated by taxation issues.

A case in point is drugs giant Bristol-Myers Squibb (BMS), which moved only 13 weeks ago to liquidate the assets of an Irish-registered holding company through which it funnelled profits totalling almost €6 billion in 2003, 2004 and 2005. A declaration of solvency for the company - Bristol-Myers Squibb International Holdings Ireland - indicates it will have a surplus of €24.97 billion after paying debts.

There will be no realisation of cash from the liquidation. Rather, the surplus represents the value of the international assets held by the holding company that are now being transferred abroad.

Established in late 2002 with only one direct employee, this company held the assets of more than a dozen subsidiaries and affiliates of BMS in Ireland, the US, New Zealand, Guatemala, Hungary, Colombia, Indonesia, Switzerland, Costa Rica, Spain, Argentina and the Netherlands.

For tax reasons, such assets are now being moved to another jurisdiction. BMS will not reveal where. But a spokesman said they are not being moved to Belgium, a location said to have stimulated the interest of big organisations with Irish interests after a reduction last year in the taxation of holding companies.

"As part of the company's ongoing review of its financial operations, BMS has conducted this liquidation in order to align its overseas affiliates in a more efficient manner," a spokesman said. "It is important to recognise that this is a liquidation of an entity that holds investments in other BMS affiliates, without any business operations or workforce. This action does not or will not have any impact on day-to-day operations in Ireland, nor does it affect any jobs at BMS Ireland."

Still, the very scale of the liquidation suggests that the transfer of assets arises from a significant strategic decision within BMS. Thanks to "unutilised tax losses", the holding company paid out only tiny taxes in Ireland. After a pretax profit of €2.2 billion in 2004, for example, it paid corporation tax of €489,940. That BMS now finds compelling reasons to move the assets from Dublin suggests that Ireland's tax appeal has diminished in its eyes.

This may result from the unwinding of tax losses here, but the development of new incentives elsewhere might also be a factor.

If BMS is estimated to be conducting the largest voluntary liquidation of an Irish company, it was not alone in winding up significant Irish assets last year.

Coca-Cola Hellenic Bottling Company moved last October to liquidate assets of €2.23 billion, but said yesterday that "the disposal was a housekeeping exercise and had nothing at all to do with tax planning". The company would not say whether it was moving the assets from Ireland.

Other voluntary liquidations were of smaller scale, but financially significant.

Holcim, the Swiss building materials giant, moved in October to liquidate an Irish subsidiary with assets of SFr1.21 billion (€751 million). "This is an investment company that was not being used any more and therefore it was liquidated," said a spokesman. He declined to say whether tax was a factor.

For its part, Cable & Wireless said the liquidation of four treasury management operations for some €641.7 million last year was not tax-driven and would not result in cash leaving Ireland. "These liquidations are about tidying up our register of companies as they are no longer used due to changes in our business. The liquidations are not about seeking preferential tax breaks."

Similarly, drugs giant Pfizer described the €469.79 million liquidation of a company called Pfizer International Portfolio Investments as an "internal transfer of assets" within Ireland last year.

There was no response from Pepsi Bottling Group when asked whether the €320 million liquidation of its PBG Northern Atlantic unit last October was tax-driven.

Neither did Banco Santander respond when asked whether tax was at issue in the €463 million liquidations last December of two indirect subsidiaries, White Dolphin and Falcon Solutions.

As Ahern and Cowen sell Ireland to the Americans this bank holiday weekend, some international groups already here are looking for fresher pasture.