Is Pfizer's Deal Good For Ireland?
25 November 2015 - 7:02PM
Dow Jones News
(FROM THE WALL STREET JOURNAL 11/25/15)
By Denise Roland
LONDON -- If Pfizer Inc. pulls off its $155 billion proposed
tie-up with Allergan PLC, the combined giant will reap the benefits
of Ireland's lower taxes.
But what does Ireland get, apart from the bragging rights to
playing host to the world's largest pharmaceutical company?
Irish politicians and businessmen have welcomed the news, but
others have raised doubts over how much the country stands to gain
from the flurry of multinationals flocking there for tax benefits.
Dublin isn't likely to reap a big tax windfall itself from the
move, and with both companies having sizable workforces in Ireland
already, the deal raises the specter of job losses.
Pfizer employs more than 3,000 people in Ireland, across several
manufacturing sites and some other operations. Allergan is also a
major employer, with around 2,000 Ireland-based staff.
Pfizer's move is unlikely to result in any immediate extra
investment in Ireland, but some hope that the change of address
will bring side benefits. Fergal O'Brien, head of policy and chief
economist at Ibec, which represents Irish businesses, said he hopes
the "shop window" opportunity of more visits from Pfizer's top
brass will "create greater awareness of what Ireland can
offer."
Still, any upside from having top executives visit Ireland could
be offset by job losses following the deal. Pfizer said Monday that
it expected to cut more than $2 billion from its operational cost
base in the three years following the deal. A spokesman for
Ireland's finance minister, Michael Noonan, said the only "major
concern" was that the deal "would result in an increase in
employment here rather than a decrease."
Pfizer has said its combination with Allergan, structured as a
so-called inversion, would trim its effective tax rate to about 17%
or 18% from roughly 25%. But that doesn't mean Ireland's Exchequer
will necessarily get any more tax revenue from Pfizer than it
already does.
Around 80% of Ireland's total corporation-tax revenue comes from
multinational companies running operations in the country, with
Pfizer already one of the big contributors. Under Irish law,
corporation tax must be tied to real economic activity -- companies
can't simply funnel their global profit through Ireland because
they are based there.
John Fitzgerald, adjunct professor of economics at Trinity
College Dublin, said it would be virtually impossible for Pfizer to
book significantly more profit in Ireland than it already did.
Pfizer's world-wide activities were "unlikely to be brought within
the Irish tax remit," he said.
What is more, pharmaceutical companies based in Ireland are
increasingly shifting profit elsewhere, according to official
figures. That is likely because other jurisdictions such as Bermuda
are more attractive for mobile assets such as intellectual
property, according to Prof. Fitzgerald. Nonetheless, the Irish
wage bill for the pharmaceutical industry has remained more or less
stable, indicating that despite profit moving elsewhere, Ireland
isn't losing out to lower-tax jurisdictions for jobs and
investment.
Welcoming one of the largest U.S. companies to Ireland's shores
could also have diplomatic ramifications. Ireland's Mr. Noonan on
Monday stressed that the government played no part in enticing
Pfizer to the Emerald Isle. "They're obviously doing it for tax
advantages because Allergan have their corporate headquarters in
Ireland . . . but we're not pushing for an inversion," he said.
Even so, disgruntlement in Washington could cast a shadow over
one of America's strongest relationships.
"A lot of other countries are cross," said Prof. Fitzgerald. But
"if there were huge benefits to Ireland, you might put up with the
irritation."
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(END) Dow Jones Newswires
November 25, 2015 02:47 ET (07:47 GMT)
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