Medtronic Acquires Covidien and Irish Tax Rate

Tax attorney Rob Wood discusses his recent Forbes article “Medtronic To Buy Covidien, Go Irish, Says It's Not About Offshore Taxes.” The article analyzes the acquisition of Covidien (maker of devices used in surgical procedures) by Medtronic (world’s largest manufacturer of pacemakers, defibrillators, stents, etc.) for $42.9 billion.

Rob Wood

Rob Wood

While the companies are engaged in similar activities, and this may be helpful to Medtronic, the big advantage, opines Wood, is that Medtronic will be able to have its host merger headquarters in Ireland. That could give Medtronic some big tax savings because of the corporate tax rate in Ireland (12.5%, as opposed to 35% in the U.S.). A deal of this sort is called an inversion. It is not uncommon for big corporations to have their headquarters to have their headquarters in countries with lower tax rates.

Wood notes that companies like Apple make routine use of Ireland to shelter cash reserves. This phenomenon has sparked discussion of the idea that the United States should consider reducing corporate taxes. Seeking to maximize profits by lowering expenses (including taxes) just makes sense in a competitive world.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.