Monday, November 23, 2015
Ireland is Getting Bigger
As of today, pharmaceutical giants Allergan Plc and Pfizer have agreed to a record setting $160 billion deal. This deal will allow the Dublin-based pharma company, Allergan, to buy Pfizer. Thus, like many pharma companies have been doing, Allergan will be moving its HQ to Ireland for tax reduction purposes. One might wonder how long the corporate tax rate is there, and it is a minute 12.5%. This will allow for increased profit because they are currently paying a 35% corporate tax. What is ironic is that the size of this deal is close to Ireland's GDP last year, which was only $200 billion. The Irish government has no problem with these two companies clearly merging for taxation purposes because both of the companies had previously done business in Ireland. This leniency will most likely encourage more corporations to move their HQ's to Ireland. Not only does this benefit the firms that are located in Ireland, but it should benefit the Irish economy as well: potentially creating more jobs. Do you think that more corporations should be moving to Ireland? Currently, over 140,000 people are directly employed by over 700 U.S. companies in Ireland. Interestingly, Ireland is the biggest foreign economy for U.S. FDI in the chemical sector, which includes drugs.
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3 comments:
So from a management perspective, moving to Ireland is a great idea. The 22.% tax savings is a way to instantly increase the company profit margin. However, a more policy-focused viewpoint isn't as favorable. Because the company benefits from US consumers, legal protection, etc. they should pay for that. Realistically though, I think the US will need to be competitive to avoid these companies jumping ship.
I mean, I don't necessarily think it's a good idea for companies that have no ties to Ireland to move there. Yes, taxes are lower, but shouldn't a company be willing to pay taxes in areas where they are actually based? Soon enough, Ireland will become the next business hub. But is there any innovation going on there, or is it just a location for preexisting companies to get financial breaks?
I think that this is a smart business step for companies. With the 22% tax break opportunity, who wouldn't want to move to Ireland? Not only does it allow for a tax break incentive, but going off of what Tyler said, it instantly increases the company's profit margin.
I also think that with this new incentive, it will be very hard for companies to actually move to Ireland due to the regulations and guidelines required for a company to actually join the market. Therefore, I think that the United States will have to work to keep companies marketing operating domestically, but it won't be as challenging as many except it to be.
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