Tax inversions are harder and harder to come by these days thanks to new, stricter rules from the U.S. Treasury Department. But that doesn’t mean there aren’t still creative ways for companies to slice their tax rates.
Just ask Flamel Technologies ($FLML), a French company that's subject to U.S. tax after a 2012 buyout of Missouri-based Eclat. Two years back, the company shifted all of its tangible IP to Ireland from France--and now, it’s reincorporating in the tax-advantaged country by way of a merger with subsidiary Avadel Pharmaceuticals, which was incorporated in Ireland last December.
The way CEO Mike Anderson sees it, Ireland is “an ideal location” to execute on the company’s vision; It’s “quickly becoming a global pharma hub, and offers corporate governance policies more akin to those in the U.S.,” he said in a statement.
But it’s no secret that taxes also played a role in the decision. Last year, the company shouldered a full-year effective tax rate of 48%--and as CFO Mike Kanan told investors on the company’s Q4 call, Flamel was “obviously not satisfied with” that number. During Flamel’s Q2 call earlier this month, Kanan told shareholders the company was “working on other tax-planning ideas that could potentially assist in lowering our cash taxes.”
Several of Flamel’s predecessors managed to snag Irish addresses without all the red tape. Companies including Allergan ($AGN), Jazz ($JAZZ) and Perrigo ($PRGO) zeroed in on Irish-domiciled buyout targets, using the inversion process to shift their headquarters after the acquisitions closed.
Ever since 2014, though--when AbbVie ($ABBV) tried to do the same with Shire ($SHPG)--that’s been tougher; in an effort to thwart the merger, the U.S. Treasury tightened the reins on inversions, scuttling the $54 billion transaction.
Since then, two more crackdowns have followed, the most recent of which toppled Pfizer’s ($PFE) $160 billion Allergan megamerger--and stateside execs haven’t been shy about sharing their feelings on the topic. Pfizer skipper Ian Read, for one, wrote in a Wall Street Journal opinion piece in April that U.S companies paying high corporate tax rates "compete in a global marketplace at a real disadvantage.”
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