Belfast Telegraph

€10bn knocked off firms' value in US tax loophole crackdown

By Colm Kelpie and Gavin McLoughlin

Almost €10bn (£7.8m) was wiped off the value of more than a dozen companies on both sides of the Atlantic yesterday after the US announced rules to curb so-called corporate inversions.

The Republic's Junior Finance Minister Simon Harris signalled Ireland had nothing to fear from the US Treasury move, which will in theory make inversions more difficult and less rewarding.

In an inversion, a US corporation, often a pharmaceutical company, avoids US taxes by buying or setting up a foreign company in another country and then moving its tax domicile to that country.

Whether the rules, which follow months of political debate in the US, will be enough to scupper pending or under-consideration deals remains unclear.

The shares of some companies involved or interested in merger deals were dealt crippling blows by the crackdown.

The pharmaceutical giant AstraZeneca, which has operations in Ireland, slid 3.6%, while fellow pharmaceutical company Shire's stock dropped 2.5%.

Abbvie, which is also based in Ireland, slid 1.7% in midday US trading, while Pfizer, the biggest US pharmaceutical company, dipped about 0.3%.

More than half a dozen other companies in the US and Europe saw their shares fall because of the move by the Treasury.

But the minister said US companies were in Ireland for a variety of reasons, not just tax. "I think a lot of the issues that have been mentioned over the last number of months, including inversions and everything else by President Obama, have been attempts to muddy the water," Mr Harris added.

"I don't think that it's a fair reflection. This country doesn't in any way, shape or form seek such companies. We're only interested in seeking companies that bring real jobs and real benefit to the country.

"Inversions, brass-plate companies, call them what you will, they don't bring jobs, they don't bring tax and they actually cost this country money in terms of EU contributions."

Last month, Endo, another pharmaceutical company that "inverted" to Ireland last year, said it was confident US rule changes would not force it back into the American tax regime.

Endo moved to the Republic when it bought the Dublin-based Canadian drug maker Paladin and then moved its global headquarters across the water, making the company liable for tax on profits at the Republic's 12.5% rate instead of the 35% charged by the US.

It was unclear whether the tougher stance adopted by the Obama administration on the controversial deals would end any of the handful of buyout or mergers currently in the works.

Burger King, which is in the process of an inversion deal with Canada's Tim Horton's, said that it would proceed with its plans despite the US Treasury's actions, adding that the transaction was not about the tax benefits.

Investors had been expecting some action from the Obama administration to clamp down on tax-avoidance inversions, but the steps announced were more far-reaching than anticipated, analysts at Deutsche Bank said.

The move could kill off the prospects of Pfizer returning to lodge another bid for AstraZeneca at the end of November, when a six-month cooling-off period imposed by takeover rules finally comes to an end.

Belfast Telegraph