Pharmaceutical Companies See a Pot of Gold: Why are Pharma Companies Inverting to Ireland?

Abstract

A recent trend has seen U.S. pharmaceutical companies flocking to Ireland. The main motivation has been called a tax inversion, where the company will relocate to another country with lower tax rates in order to save money. The United States government has become very concerned over the lost revenue from these companies. This paper looks further into the motivation behind inversion and what drives a company beyond the tax implication to engage in an inversion. The four drivers in this paper are revenue structures, industry origins, ownership structure and legal factors. This is addressed through a case study which examines the drivers by comparing the pharmaceutical industry to the software industry. Through evaluation of the case study, ownership structure, revenue structure and industry origins are all found to have an impact of the firm’s decision while legal factors do not. Future research can be expanded to other industries that may have similar characteristics to the pharmaceutical industry in order to examine potential companies that may want to engage in an inversion.