The “Double Irish”

by Henry Farrell on May 24, 2010

Apropos of my piece on Ireland’s bubble economy for the _Washington Monthly,_ it does no good thing for a country’s reputation when they start naming tax dodges perfectly legitimate tax avoidance strategies after you.

bq. On advice from Ernst & Young, Forest Laboratories Ireland reorganized that year, dropping the country from its name. The newly dubbed Forest Laboratories Holdings Ltd. established a registered office in Hamilton, Bermuda, declaring the island its tax residence. This unit took control of licensing the patents. A second subsidiary in Ireland inherited the old name. It handled the manufacturing, sublicensing the rights to the patents, according to a corporate disclosure and an internal Forest flow chart tracing the arrangement that was reviewed by Bloomberg. The change helped the Irish subsidiary cut its effective tax rate to 2.4 percent from 10.3 percent the year before the reorganization, according to its annual reports. It did so by deducting from its taxable income the fees that went to Bermuda, which has no corporate income tax. Charlie Perkins, a spokesman for Ernst & Young, one of the so-called Big Four accounting firms, declined to comment on its work for Forest. International tax planners have a nickname for the type of structure the drugmaker adopted: the Double Irish. …

bq. Even though Forest described its Bermuda office as the Irish subsidiary’s “principal place of business” in a 2008 court filing, it has no employees on the island. The closest it comes to an actual presence is its registered office at Milner House, at 18 Parliament Street in Hamilton, a beige building nestled among the pastel structures of the island’s main commercial area. There, Coson Corporate Services Limited, part of law firm Cox Hallett Wilkinson, provides “corporate administrative services” for Forest Laboratories Holdings, according to Jeannette Monk, who identified herself as the company’s corporate administrator. Asked whether Forest had any employees there, she said, “This is a law firm.”

But perhaps “Double Dutch” would be better …

bq. To avoid another Irish tax, Forest’s profits don’t fly direct to Bermuda. They have a layover in Amsterdam. Fees paid to the Bermuda unit pass through yet another subsidiary, Forest Finance BV in the Netherlands, according to the internal Forest document, Dutch corporate records and a person familiar with the transaction. That route bypasses a 20 percent Irish withholding tax on certain royalties for patents, according to Richard Murphy, a U.K. accountant who worked on similar transactions and is director of Tax Research LLP. The structure takes advantage of an exemption from the levy if payments go to a company in another EU member state, Murphy said.

A really good article from Bloomberg – go and read it.

The shameful axing of the Child Trust Fund

by Chris Bertram on May 24, 2010

The Lib Dems (for it was their policy and not the Tories’) have axed the Child Trust Fund, which, as Stuart White points out over at Next Left, was one of those rare policies directly inspired by the egalitarian liberal theorizing of the past forty years. (h/t Virtual Stoa). (To discuss, head over to Next Left).

The Rand Paul vs. Civil Rights Act business has been fascinating.

I have particularly enjoyed attempts by Paul defenders to brush off the significance of his initial comments as ‘merely philosophical’ – as college bull-session irrelevancy, for which he is being unfairly held accountable. When, of course, the whole Tea Party point of Rand Paul’s candidacy is his libertarian-conservative philosophy, and his promise to stay true to the implications of it, as a legislator. (So the whole thing has been like this American Elf strip, but substitute ‘philosophy’ for ‘costume’.)

In walking this stuff back – in saying he would have voted for the Civil Rights Act, after all – Paul is walking back his longstanding, core philosophical commitments. So now we know: he is willing to vote for things things that, by his own lights, go against the Constitution and reduce individual liberty, in the most essential sense (freedom = unencumbered enjoyment of private property rights). This retreat really ought to be worse than out-and-out liberalism, again by Paul’s own lights, because liberals at least have the decency to be confused about what the Constitution says, having hallucinated commerce clause penumbrae that make it all ok. And liberals don’t value freedom all that highly, supposedly, so it’s not surprising that they are perfectly willing to chuck liberty into the fiery maw of the Moloch of ‘social justice’. At least there’s a failed god of socialism that they are doing it for. What’s Paul’s philosophical excuse? Why aren’t conservative-libertarians up in arms, complaining about this cowardly betrayal of Paul’s whole philosophy, after he got the nomination on the strength of his philosophy? Is no one willing to shout from the rooftops that Jim Crow – privately and informally enforced! – is the price we should be willing to pay for freedom? What’s the point of equating liberty with private property rights if you aren’t going to equate liberty with private property rights? Why are Paul’s defenders scrambling to make out how, plausibly, libertarianism should eliminate informal/social Jim Crow, once you clear away all legal, institutional, governmental forms of it? The essential point should be: even if it doesn’t, that’s not so important, because it’s not unjust. (Why would you be a propertarian sort of libertarian if you didn’t think so?)

Indeed, isn’t all this what Jonah Goldberg derides as ‘sherpa conservatism‘ – that is, the canard that conservatism is only acceptable as a more sure-footed means to liberal ends? So libertarian-conservatism is only acceptable if it conduces to a ‘nice’, racially-harmonious, integrated, multi-culti, ‘socially just’ society? When will libertarian-conservatives finally be willing to stand up for what their principles imply? Healthy civil society is based on bedrock respect for individual property rights. Period. [UPDATE: And formally equal political rights, true. But that doesn’t really change the equation.] It’s invidious to insinuate that a ‘nice’, integrated, racially harmonious, multi-culti, ‘socially just’ society must be our sole model of healthy civil society. (Yes, all that’s fine. But it’s not required, in principle, so you shouldn’t sacrifice principle for the sake of it. Sheesh. Barry Goldwater is spinning in his grave.)

Let’s consider David Bernstein’s latest post. [click to continue…]