* More than 40 percent of S&P 500 have subsidiaries in
* PepsiCo subsidiary paid tax at rate of just 0.004 percent
* Many companies have multiple subsidiaries
By Padraic Halpin, Carmel Crimmins and Himanshu Ojha
DUBLIN, July 14 Occupying a single floor of a
three-storey building in a suburban Dublin office park, Western
Union's offices are notably modest for the international
headquarters of the world's largest money transfer firm.
The set-up is typical of swathes of U.S. companies using
Ireland to cut their tax bill. A Reuters analysis of Irish and
U.S. filings shows that more than 40 percent of the S&P 500 have
registered subsidiaries in the country.
That nexus, which has created over 100,000 jobs for Ireland,
was laid bare when the U.S. Senate revealed that technology
giant Apple had paid little or no tax on tens of
billions of dollars in profits channelled through the country.
Ireland, which has courted U.S. business for decades,
rejects the Senate's claims that it is a tax haven, but the case
has damaged its reputation as it seeks to emerge from an EU-IMF
bailout and its export-focused economy dips back into recession.
Company documents in Ireland and filings in the United
States shows that many firms have multiple units in Ireland,
where corporate income tax is 12.5 percent - about a third of
the top U.S. federal income tax rate of 35 percent.
In many cases, several subsidiaries are registered at the
offices of Dublin-based law firms.
In Western Union's case, Unit 9, Richview Office Park houses
11 of its 12 Irish subsidiaries. The company made 92 percent of
its pretax income outside the United States last year, although
a fifth of its staff work in the country.
That allowed the Colorado-based company to cut its effective
tax rate to 12.2 percent - about average for a large U.S.
Companies, investors and some lawmakers argue it is a firm's
duty to keep its tax bill as low as possible so it can invest to
grow and return money to shareholders. Western Union said it
pays full tax on all profits earned in Ireland.
"The (Irish) tax rate is not that relevant, because nobody
pays 12.5 percent," said Jim Stewart, a professor at Trinity
College Dublin who specialises in corporate finance and
"It's about the ease of incorporation, the ability of Irish
corporate law and tax law to fit in with IRS (Internal Revenue
Service) requirements, and the flexibility that is shown by the
Department of Finance and Revenue to any of the multinationals'
needs. If they have a problem, the law will be changed."
A spokesman for Ireland's Department of Finance said it did
not change laws to suit multinational companies and that its
focus was on the local economy.
"In each Budget and Finance Bill the government introduces a
range of measures to support key sectors in the Irish economy,"
the spokesman said in an emailed statement.
Ireland's Office of the Revenue Commissioners, which
assesses and collects taxes, said in a statement it did not do
special deals on tax rates for any company.
TAXED AT 0.004 PERCENT
Apple's ability to pay tax of just two percent of its $74
billion in overseas income over the past three years hinged on
an unusual loophole in the Irish tax code that allowed it to
channel profits into Irish-incorporated subsidiaries that had no
declared tax residency anywhere in the world.
U.S. rules that allow companies incorporated abroad not to
pay U.S. taxes complemented the arrangement.
Apple, which employs about 4,000 people in Ireland, is just
one of many companies that route money through the country to
cut taxes on company profits and fund investments.
PepsiCo Global Investment Holdings Ltd, which provides
financing to other companies in the drinks group and is one of
14 Irish subsidiaries, made a profit of almost $6 million in
2011 and paid tax of $215 to Curacao, giving it a rate of 0.004
percent, Irish company records show.
A spokeswoman for PepsiCo said it fully complies
with the tax laws where it operates and pays all taxes owed.
Company records also show that an Irish holding company of
medical device manufacturer Boston Scientific, one of
the country's top multinational employers, paid $60 million tax
on profits of $1.4 billion in 2011, or about four percent.
Boston Scientific declined to comment.
Pharmaceutical company Bristol-Myers Squibb said in
U.S. Securities and Exchange Commission (SEC) filings that it
had favourable tax rates in Ireland and Puerto Rico under grants
not scheduled to expire before 2023.
Ireland's Industrial Development Agency (IDA), tasked with
attracting foreign firms to the country, said it offers grants
for employment, research and development, and training.
Ireland's Office of the Revenue Commissioners said it did
not comment on the tax affairs of individual companies.
NO QUESTIONS ASKED
At least 206 of America's largest 500 companies by market
capitalisation have one or more subsidiaries in Ireland, Reuters
Drugmaker Pfizer leads the way with 32
Irish-registered companies. Pfizer makes some of it drugs in
Ireland, employs 3,200 people and has invested $7 billion there
in the last 45 years. It did not reply to Reuters request for
comment on the number of subsidiaries it has in Ireland.
SEC filings also showed hundreds of S&P 500 subsidiaries are
based in the Netherlands and Luxembourg as well as more opaque
jurisdictions such as the British Virgin Islands and Bermuda.
It was not clear to what extent companies' Irish units
contributed to reducing their tax bills.
Companies can opt to declare only "significant subsidiaries"
to the SEC, and some have names unrelated to their parent,
making it hard to pin down exactly which ones have an Irish
The 14 members of the S&P 500 that have 10 or more companies
incorporated in Ireland have between 77 and, in the case of
Pfizer, 655 declared subsidiaries worldwide.
More than half of those companies employ 600 or more people
across Ireland. Stanley Black & Decker, which has a tax
office in Dublin and a services centre in Cork, employs 58
people at its 15 Irish-registered subsidiaries.
It did not return requests for comment.
Irish lawmakers are reluctant to dig any deeper. They opted
earlier this month not to interview multinational firms at tax
hearings, a move critics said was protecting companies that
don't pay their fair share of tax.
"I think politicians are afraid of the multinationals, said
Pearse Doherty of the left-wing Sinn Fein opposition party, who
led calls for multinational bosses to face parliamentary
grillings similar to those in the United States and Britain.
"They're afraid ... that they will pull out of Ireland. It
seems as if they are on bended knee. It reminds me of the Celtic
Tiger era when the bankers ruled the roost."
"NO GET-RICH-QUICK SCHEME"
With the country's unemployment rate just under 14 percent,
almost three times where it stood five years ago, such concerns
are understandable. About 700 U.S. firms account for 115,000 of
the 1.8 million Irish residents who have hung onto their jobs.
Big job announcements from Apple, Eli Lilly and Co
and eBay Inc's Paypal have helped offset the worst of
the jobs crisis, with public service numbers still falling and
Ireland's stricken banks still laying off staff.
The positive impact of international companies can be seen
in the once derelict area of Dublin's docklands, now dubbed
Silicon Docks, where Google and Facebook's
offices sit next to the country's largest theatre, newest
five-star hotel and modern apartment blocks.
Ireland's government insists its tax rate is transparent and
other countries are to blame if the tax paid by companies like
Apple is too low. The finance minister said Ireland would not
become the U.S. Senate's 'whipping boy' on tax.
"Ireland is not some kind of 'get-rich-quick' scheme for
Americans," Peter Keegan, president of the American Chamber of
Commerce Ireland told its annual Independence Day lunch.
Keegan, who is the head of Bank of America Merrill Lynch
in Ireland, described the recent criticism as being
based on "vague accusations" and "a poor understanding of global
But for every Intel or Pfizer employing significant
numbers in Ireland, there are many that bring few jobs with
them, like reinsurer XL, which shifted its parent holding
company to Dublin from the Cayman Islands in 2010 and employs 57
people in Ireland.
A spokeswoman for XL said it did not reincorporate to
Ireland to reduce its tax bill and its worldwide effective
corporate tax rate has been largely unaffected by the move.
But Ireland cannot escape the stigma attached to the "Double
Irish Dutch sandwich", an arrangement where an Irish-registered
entity cuts its taxable profit by paying a Dutch affiliate,
which then pays a subsidiary in a tax haven.
Almost three-quarters of the 206 firms Reuters identified as
having Irish subsidiaries also had one or more Dutch units.
According to one of the country's most famous proponents of
the Dutch tax arrangement, Ireland's economy would be in even
bigger trouble were it not for its competitive tax edge.
U2 singer and anti-poverty campaigner Bono faced criticism
that the band had moved part of its business to the Netherlands.
"The shock horror moment here is U2 behaving like a
business," he told Irish broadcaster RTE.
"We live in a small rock in the north Atlantic, and we would
be under water were it not for very clever people in government
and the revenue who made tax competitiveness a central part of
Irish economic life."