Just last week, when I wrote about Mallinckrodt (MCK) buying Cadence (CAD), I noted in passing that while the Mallinckrodt name is German and the company's heritage is American, Mallinckrodt is technically based in Dublin.
What's going on here?
What's going on is that big companies are taking advantage of Ireland's low 12.5% corporate tax rate. Even that rate understates the country's tax advantage.
By using territorial taxation, which doesn't tax profits made outside the country at all, Ireland also gets around U.S. transfer pricing rules.
It's not just the tax rate that makes Ireland an attractive place to book profits, but what it actually calls subject to tax, the tax base. Ireland's is very low, making it very attractive to any company which, like a drug company, is based in intellectual property.
By placing intellectual property in an outright tax haven, such as Bermuda, and putting that under an Irish subsidiary, tech companies have avoided billions of dollars in U.S. tax over the years. By having two Irish units move costs from high-tax to low-tax countries, a strategy called the Double Irish, tax bills are reduced further.
Irish officials insist their country is not a tax haven, and some commentators here blame U.S. law rather than Irish law for all this, but the fact remains that Ireland is a great place to pretend to do business, even if the economy there is still recovering from the Great Recession.