President Obama used ‘corporate inversions’ as the poster child for his Presidential campaign promising to outlaw the practice and in the process gave a number of legitimate Caribbean Offshore Financial Centres (OFCs) a lot of unnecessary grief.
Branded as immoral and unpatriotic, his proposals to prevent companies who purport to move their corporate headquarters offshore from claiming a deduction for the cost of moving are still to be endorsed by the Republican-controlled Congress.
Truth is the practice is alive and well.
This post World War II economic assistance saw the US, untouched by the savagery of combat that plagued most of Europe in the early 1940s, directly funnelled investment into the Continent in an effort to help rebuild the war-ravaged economies while providing a ready market for US goods and services.
Now with Ireland facing a staggering EU-bailout bill and its source markets concerned more with saving the ‘monetary union’ than buying financial services, US companies are doing their part to support the Irish, while saving a tidy sum in US onshore taxes.
Perhaps Ireland is now the preferred tax haven for US companies because Bermuda and other ‘inversion scapegoats’ attract too much attention, especially in an election year. Or maybe the islands are a little too close to the President’s doorstop.
The announcement however, of the relocation of another large US company to Ireland, makes the point that the potential savings on the US 35% corporate tax rate is just too good an opportunity to forgo. Especially since the moral indignation about such moves may have now given way to more pragmatic concerns about a struggling US economy.
In 2002, Coopers Industries, an American company trading in the distribution of electrical equipment and started almost two centuries ago in Ohio, was part of the exodus of US companies who moved their headquarters to Bermuda.
In 2009 Cooper moved again but this time to Ireland, following the footsteps of another American multinational Ingersoll-Rand.
Last month it a deal worth US$11.8billion Eaton Corp. acquired Coopers and promptly announced plans to move the whole ‘kit and caboodle’ to the Land of Saints and Scholars.