UK pharmaceutical company Shire has announced it is moving its tax base from Britain to Ireland to cut its tax bill.
The move will mean Shire will be able to avail of Ireland's 12.5% corporate tax rate on its global earnings, instead of paying 28% in the UK.
Shire will remain headquartered in the UK, but it will create a new holding company in Jersey and pay tax in Ireland. There is no job creation for Ireland associated with the change.
The Confederation of British Industry has said it is worried Britain is losing its attractiveness and that other British firms with international activities may follow suit.
Other UK commentators have expressed concern that Shire's move may be the start of an exodus of UK companies to Ireland and other low tax countries.
In a statement, Shire says the vast majority of its revenues are generated from outside the UK and says its new tax strategy is designed to 'help protect the group's taxation position'. The move is subject to shareholder approval.
The Financial Times reports that Shire's main concern was the prospect of higher taxes on overseas intellectual property and financing operations.
Shire is involved in hyperactivity and attention deficit disorder treatments as well as human gene therapy.
Speaking on RTE Radio this morning, Friends First economist Jim Power said if many more British companies were to follow Shire's example, Ireland was in danger of finding itself labelled a 'tax predator'.
He also said that Ireland might lose the support of the UK in its lobby in Europe against a common corporate tax rate.
Shire paid £4.2m sterling in corporation tax in 2006 out of a total tax liability of £8.8m. The company has an operation in Ireland which employs 55 people. The company says that while there are no jobs resulting from this initiative, as Shire grows and expands staffing levels here should benefit.
