In the U.S., politicians and officials have derided "inversion deals," which allow an American company to move its headquarters overseas to cut its tax bills. In Ireland, they're celebrating.
The Irish government on Tuesday revised the country's economic growth rate in 2015 to 26.3 percent from a preliminary estimate of 7.8 percent. While Ireland's economy has been on the upswing since the country repaid its bailout, it wasn't that the nation suddenly came roaring back in an unexpected way. Rather, it was the magic of those inversion deals and other sleights of finance.
Under a typical inversion deal, a U.S. company takes over a foreign counterpart and, in the process, shifts its headquarters overseas. The takeover targets for such deals are typically based in countries with low corporate taxes — like Ireland, with its 12.5 percent rate.
The combined company's global profits are then reported in its new home base, regardless of where they are earned. In essence, Ireland's GDP is artificially inflated.
Inversions have drawn the ire of the Obama administration, since they put a greater burden on U.S. taxpayers.
Last year, the medical device maker Medtronic bought its rival Covidien, reincorporating in Ireland. More recently, Johnson Controls of Milwaukee agreed to join up with Tyco of Cork, Ireland.
Inversions like that were one of the main drivers for the sharp rise in GDP, according to Ireland's Central Statistics Office. The country's economy was also bolstered by the import of new aircraft for international leasing activities, another financial gimmick.
Michael Noonan, Ireland's finance minister, went to great lengths to explain that the recovery is real. He pointed to other strong data including government revenue, consumer spending and a jobs report as being "consistent with an economy where recovery is firmly established."
New York Times