Mallinckrodt won’t give up Irish home

CEO says ‘pretty dramatic change’ in US tax code would be needed to move back

Minister for Health Leo Varadkar pictured with Mallinckrodt chief executive Mark Trudeau in Dublin.

Minister for Health Leo Varadkar pictured with Mallinckrodt chief executive Mark Trudeau in Dublin.

 

Minister for Health Leo Varadkar pictured with Mallinckrodt chief executive Mark Trudeau at an earlier announcement by the company. Mallinckrodt doesn’t expect to return its tax address to the US after a decade and a half as a foreign-domiciled drugmaker, at least not without major changes to the American corporate tax system.

“It’d have to be a pretty dramatic change to the US tax code,” chief executive officer Mark Trudeau said in an interview in New York Tuesday. “We’re already foreign domiciled, so we may as well take full advantage of it.”

Mallinckrodt, which has a tax address in Ireland, said that it will pay a tax rate of 15 per cent to 17 per cent in 2016. That low tax rate can give the company an advantage when seeking acquisitions, though Trudeau said that’s not the primary impetus for deals.

While Mallinckrodt was founded in the US and has executive offices in St. Louis, Trudeau said that there’s not a reason to move Mallinckrodt’s address back, without major incentives that would make the US tax situation competitive with other low-tax domiciles like Ireland. The US has a corporate rate of 35 percent, the highest in the developed world, and taxes companies no matter where they earn income. US lawmakers have cited companies moving their tax addresses abroad as demonstrating the need for changes, with Pfizer Inc.’s proposed shift to Ireland through a $160 billion merger with Allergan as the latest example. Yet there has been little agreement between Democrats and Republicans over how to change the system, and just as little legislative progress.

Journey abroad

Mallinckrodt’s journey abroad was unlike many US companies that have in the last two years used deals with smaller foreign rivals in what’s known as a tax inversion. The drugmaker’s path from St. Louis -- where it was founded in 1867 -- is a winding one. In 1992, it opened an Irish manufacturing plant. The company was bought by Tyco International Plc in 2000, which had moved its own headquarters to Bermuda from New Hampshire in 1997. Tyco then spun out its health unit, calling it Covidien Ltd., in 2007, and the new business moved its tax address to Ireland. Six years later, Covidien spun out Mallinckrodt, keeping an Irish legal address.

Bloomberg