The company he keeps

Mark O’Connell | 12 Jan 2016 | UK and Ireland Perspective

If we judge a man by the company he keeps, should we judge a location by the companies it attracts?

Pfizer’s proposed acquisition of Allergan, headquartered in Ireland has attracted much unwelcome political attention not least because it will deprive Uncle Sam of some $20bn of tax revenue from the combined entity through the practice of tax ‘inversion’ whereby US companies can relocate their tax domicile though acquisition.

Ireland’s IDA have been playing down the tax avoidance motives behind the deal, and describing it as strategic and driven by Ireland’s skills and R&D environment. While the CEO of Pfizer is taking about pouring all the tax savings back into R&D in the US. Hmmmn.

The merger has attracted attention from the highest levels of political office in the US including Hilary Clinton and Barack Obama who describe inversion deals as unpatriotic.

For this reason the deal completion is less likely and Ireland’s controversial image as a safe haven for tax avoidance has just become even stronger.

Northern Ireland which has recently been devolved its own corporate tax rate of 12.5% effective from April 2018 (same as Republic of Ireland) should be wary of attracting the wrong type of investors as the anticipated economic and employment bounce of such deals is minimal and the political attention unwelcome.