U.S. Sen. Ron Johnson, R-Oshkosh, said today that the Johnson Controls acquisition of Tyco, and the announced plans to place the combined company’s global headquarters in Ireland for tax purposes, shows that major changes are needed to the U.S. tax code.
The combined company’s global headquarters and legal domicile will be in Cork, Ireland, a city of about 120,000 residents.
The North American operational headquarters for the combined company, which will be called Johnson Controls plc, will be located in the Milwaukee area. Johnson Controls is currently based in Glendale.
Known as a tax inversion, the shift in legal domicile to a country with lower taxes can have large tax benefits for the U.S. company. Johnson Controls says it will save $150 million annually by placing the global headquarters in Ireland, instead of the U.S.
“I appreciate the fact that Johnson Controls will maintain its operational headquarters in Wisconsin after it acquires Tyco,” Johnson said. “I am disappointed, but not surprised, that it is doing what Tyco did a few years ago and taking Ireland as its domicile for tax purposes.
“Ireland’s top corporate tax rate is 12.5 percent. The top U.S. corporate rate is 35 percent. That’s the developed world’s highest rate, and Washington levies it even on income that companies earn in other countries. By making Ireland its tax home, Johnson Controls will still pay U.S. and Wisconsin taxes on profits it earns in America, but its overseas earnings will be subject to the far more competitive Irish tax law.
“As one of my Democratic colleagues said during a hearing on exactly this topic, ‘It’s just math.’ America needs to get its math right by scrapping our current tax code and replacing it with a very simple and globally competitive one. This will help American businesses, the Americans they employ, the Americans whose retirement saving are invested in those companies, and all the American families struggling in the weakest economic recovery since World War II. Getting the math right means more growth, more prosperity for all Americans — and more federal revenue.”
