Thursday, March 20, 2014

Buy A Lower Tax Rate

Why pay 35% when you can lower that tax rate to 20% or less?

If you're a corporate executive, that's not a question you want the board of directors asking after you've finished your PowerPoint presentation on profit and loss for the annum.

Why not buy into Ireland?

Why not, indeed. Ireland welcomes you. Cead mile failte and if you could see your way to bringing a job or two, it'd be grand, so.

Passion to cut corporate expenses
Horizon Pharma, based in the States, is buying up a similar pharmaceutical firm in Ireland. And they're not shy about the reason. They want a presence in Ireland to take advantage of the lower corporate tax rate. Headquarters will remain in Deerfield, Illinois, a quiet suburb north of Chicago. For taxing purposes, the new entity that combines Horizon with Vidara Therapeutics, will exist in Ireland.

It's all to the good for Ireland, which is counting on CEO Tim Walbert to realize his plan to expand the firm's product offerings. That has the potential to bring in new jobs at the Vidara plant, and jobs are desperately needed. The country would rather accept a smaller slice of corporate profits if it can boost job growth instead, taking a longer term outlook at the benefits and costs of the tax policy.

If Ireland can outcompete on labor costs as well, it would be sound fiscal policy for Horizon Pharma Plc to make more medicines in Irish factories. Again, the return on investing that is this reduced tax rate results in more people working, and the more people finding jobs, the better the chances that Fine Gael can retain power. Why change things to suit the demands of foreign countries like France?

As for Horizon, the company can take the money they don't pay in corporate tax and buy up other companies or other products to further expand their portfolio of drugs. More medicines yields more profits and more profits are invested again and then the stock price goes up. Basic business strategy, and one that Ireland takes advantage of. Hence the nation's stubborn commitment to a low corporate tax rate.

Not that the United States can make too much noise about the issue. There is still no American ambassador in Dublin, over a year after the last one stepped down.

You'd think they didn't care about American firms finding ways to avoid paying American taxes by turning to Irish tax havens. They don't have anyone nearby to voice a complaint.

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