On becoming Irish

The Corporate Tax Dodge

By STEVEN RATTNER, NYT

WHILE a Senate report detailing Apple’s aggressive tax sheltering of billions of dollars of overseas income grabbed headlines this week, little notice was paid to a surreptitious thrust at tax minimization that was announced at nearly the same moment.

In a news release, the American drug maker Actavis announced that it would spend $5 billion to acquire Warner Chilcott, an Irish pharmaceuticals company less than half its size.

Buried in the fifth paragraph of the release was the curious tidbit that the new company would be incorporated in Ireland, even though the far larger acquirer was based in Parsippany, N.J.

The reason? By escaping American shores, Actavis expects to reduce its effective tax rate from about 28 percent to 17 percent, a potential savings of tens of millions of dollars per year for the company and a still larger hit to the United States Treasury.

Actavis is hardly alone in fleeing to lower-tax countries. For example, Eaton Corporation, a diversified power management company based for nearly a century in Cleveland, also became an “Irish company” when it acquired Cooper Industries last year.

(More here.)