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By Ronald Fink
Accenture's reincorporation in Ireland from Bermuda won't immediately change the technology outsourcing and consulting firm's tax status, nor will it do so even if a plan proposed by President Obama becomes law. But experts say the move could prevent future tax troubles.
The move Accenture announced yesterday follows an exodus of large multinational companies from tax havens such as Bermuda and the Cayman Islands to Europe as the U.S. government plans to tighten tax rules.
Accenture said on Tuesday it does not expect any material change in its financial results or tax treatment due to the reincorporation. And contrary to some press reports, experts say that wouldn't change under the Obama administration's plan to tighten rules that currently allow firms to defer tax payments on overseas profits when they are plowed back into foreign subsidiaries.
But several bills in Congress would go further by treating foreign corporations that are controlled in the U.S. as U.S. corporations for tax purposes. And that's where reincorporation could make a difference.
Ireland, like other EU countries but unlike Bermuda or the Cayman Islands, has a tax treaty with the U.S. that is expected to prevent such tax treatment from occurring. "The feeling is that if you are incorporated in a country which has a tax treaty with the U.S., an attempt to treat a foreign corporation as a U.S. corporation may be barred by the treaty," said Robert Willens, a tax and accounting expert in New York City.
In February, Noble Corporation announced that it would switch its headquarters from the Caymans to Switzerland with this in mind. But Willens warned that the idea has yet to be tested. "Whether relocation will accomplish the stated objective remains to be seen," he wrote in a note regarding Noble's move.
Accenture shareholders will vote on the company's move at meetings within the next three to four months and the company expects the move to take effect shortly after the approval.
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