Cantillon

Inside the world of business

Tax rate is 'leader in Irish pack'

THE RELEASE of a National Irish Bank-sponsored study on foreign direct investment globally yesterday was timely – not just for the debate in Europe about our corporation tax rate but also for the keynote speakers at the Irish Taxation Institute’s annual dinner last night.

The Inward Investment Performance Monitor 2010 ranked Ireland number two in the world, sandwiched between Singapore and Thailand, for attractiveness to foreign investment.

Last year the number of overseas-backed projects coming here increased by 15 per cent with an associated increase in employment.

These were high-quality projects as well; 15 per cent involved the establishment of headquarters in Ireland, ranking us second only to the Netherlands, while for research and development Ireland was placed fifth of the 100 nations surveyed.

Last night, Andrew Cullen, president of the Taxation Institute, was unequivocal in the role our corporation tax rate plays in that success.

“Of course there are several elements of our tax strategy that influence foreign direct investment, but there is a leader in that pack; ‘the 12½ per cent’,” said Mr Cullen.

“Collectively we own it, collectively we have promoted it and collectively we have a responsibility to protect it.”

His central message was that any uncertainty over our tax rate would undermine investment. Coming from the head of a body whose members deal with the multinational’s tax matters for a living his views carry weight.

Getting Ireland to increase its 12.5 per cent headline rate might be politically popular in Europe but analysis in this newspaper in recent weeks shows that firms operating in other European countries with a higher headline rate actually pay a lower rate of overall corporation tax.

As Mr Cullen pointed out last night the flipside of an increase could be the loss of investment and an increased likelihood that Ireland is not able to pay its debts.

Elan chief enjoying healthy remuneration

It’s nice work if you can get it. Documents just filed in the US show that Elan’s top executive, Kelly Martin, trousered a total pay packet of $1.9 million (€1.38 million) last year, up from just shy of $1.7 million a year before.

This came, in fairness, as the company reported its first operating profit since the start of the last decade, boosted by earnings from flagship drug, Tysabri.

Chief finance officer Shane Cooke, the company’s second most senior executive, didn’t do badly either, although his pay fell from almost $1.7 million to $1.2 million. The drop aside, it’s not a salary to be sniffed at.

And there’s more to come, at least for Mr Martin. The 20-F details the lengths Elan went to last year to retain the services of its top man. Under a deal finalised in June, Mr Martin’s base salary was raised from $800,000 a year to a cool $1,000,000, until the middle of 2012. At that point, he becomes an “executive adviser” for a year, a role carrying a “base salary” of $750,000.

The documents also detail additional arrangements that would fall into place in the event of Mr Martin’s employment being terminated in the meantime. In certain circumstances, his benefits in this area could extend to “career-transition assistance”, including the use of a secretary and an office for up to two years.

But, to his credit, at least Martin is making sure Elan is in the news for the right reasons at the moment – yesterday the firm happily disclosed that it was due a $78 million settlement from Celegne, a US biopharma firm, in relation to patent infringement litigation. That’s 78 times Martin’s base salary, in case you need reminding.