Ireland is working to reduce its tax appeal, but the impact on the pharma sector is hazy. The Wall Street Journal reports that the Emerald Isle intends to close a tax loophole which is referred to as the “Double Irish.” The Journal explains that the rule allows companies to “funnel royalty payments for intellectual property from one Irish-registered subsidiary to another that resides for tax purposes in a country with no corporate income taxes.”
In other words, it gives corporations local tax benefits, such as a comparatively low tax rate, and a way to further discount the money upon which taxes are based. The move is legal, but the Journal points out that the spate of tax moves in which companies make name-only relocations to Ireland has been drawing a lot of negative attention to Ireland from the EU and other governments, which has prompted scrutiny of this secondary benefit that comes with being considered a local business entity.
Expectations are that the change will go into effect in 2020, but corporate responses to queries by analysts from ISI and Leerink indicate the change won’t put a dent in manufacturers’ financial outlooks. Bristol-Myers Squibb told both investment firms they don’t use this structure, while Celgene told ISI its tax rate is largely driven by Switzerland agreements. Pfizer told Leerink the change would have no impact, but told ISI the change would not be a material factor.
