Paul Schmidt, leader of Baker Hostetler's International Tax Practice Team and Coordinator of the Tax Group for the Washington, D.C., office, was quoted in a June 28, 2009, BusinessWeek article, "U.S. Companies Seek New Tax Havens."
According to the article, amid increasing moves by both the Obama Administration and congressional Democrats to clamp down on corporate overseas tax maneuvering, more companies are considering reincorporating in Ireland or Switzerland, moving their "headquarters" out of Bermuda, the Cayman Islands and the British Virgin Islands, where many major corporations have previously found favorable tax treatment.
Ireland and Switzerland may have higher tax rates than in the tropics, but both offer bigger tax savings than either the United States or Europe. Plus, both have well-established tax treaties, which decide which country has primary taxing rights and help avoid double taxation, according to the article. Also adding to the possible "relocations" is proposed legislation that would, among other things, tax corporations based in designated tax havens as U.S. corporations if they're managed and controlled here, too.
According to Schmidt, Switzerland's "statutory" tax rate is 24 percent, but with each Swiss district offering competing rates to lure businesses to put down roots, many companies end up paying much less. "It's pretty easy to get down to a total of 8 to 10 percent," Schmidt said. That's a huge savings over the potential 35 percent federal tax rate these corporations could owe in the United States.
One thing these migrating companies are likely to have in common is a more substantial local presence than they had in the islands. "They're not going to be able to get away with just brass plates," Schmidt said. Some companies may hold their board meetings in Dublin and have some kind of manufacturing base there. Many others are likely to set up separate entities to meet any requirements. "How that's interpreted in practice is looser than one might expect," Schmidt said.