Consumer goods giant Procter & Gamble, the maker of Head & Shoulders shampoo and Pringles crisps, is to liquidate two highly-profitable Irish holding companies from which it received dividends of $1.3 billion (€966.44 million) last year. Arthur Beesley, Senior Business Correspondent ,reports.
The decision to wind down the two companies, which had no direct staff and did not pay any tax in Ireland, comes amid a reorganisation of P&G's manufacturing activities here, which has led to the loss of more than 400 jobs.
P&G said it plans to liquidate the holding companies to simplify its internal structure after its $57 billion merger in 2005 with Gillette, owner of the eponymous razor-blade brand and Duracell batteries. The development was not in any way connected with its decision in March to switch some of its Irish manufacturing operations to Poland at the cost of 280 jobs in Nenagh, Co Tipperary, the group said.
That move came six months after the group made plans to let go 157 workers at its Braun factory in Carlow.
Unlike other large US organisations which have moved significant funds and assets from Ireland to other countries for tax reasons, P&G said its manoeuvres were unconnected with tax. The liquidation process has not yet begun, but accounts newly-filed for the holding companies say they will be wound down following a distribution of capital reserves via dividend payments.
Neither Procter & Gamble Holdings nor Procter & Gamble Investments employed any direct staff, but the accounts show a significant flow of money and assets through both companies. Procter & Gamble Holdings made pretax profits of $42.05 million in the most recent year and Procter & Gamble Investments made profits of $34.49 million.
Although both companies were registered in the International Financial Services Centre in Dublin, neither paid any tax in Ireland on their profits as their operations did "not fall within the jurisdiction for Irish corporation tax". While their day-to-day profits in the year to June 2006 were mainly derived from foreign exchange trading, the accounts show that the two companies booked exceptional profits totalling $1.15 billion at the end of the previous fiscal year.
These once-off profits were derived from the sale of assets that each held in Luxembourg. The assets were acquired from other P&G entities earlier in that fiscal year and "held exclusively with a view to subsequent resale", the accounts say. Each made big dividend payments in June 2006 to Procter & Gamble Eastern Europe Inc, a US-registered direct subsidiary of the P&G parent group in Cincinnati. Procter & Gamble Holdings paid out $718.73 million and Procter & Gamble Investments paid $589.48 million, according to the accounts.
P&G said such payments were not designed to avail of a special US tax break on the repatriation of foreign profits, a scheme used by many large US organisations to make big dividend payments from their Irish-registered operations. "We have done it because we want to eliminate these two Irish legal entities as the result of a global project to simplify our holding structure," said P&G.
"This project has two objectives: enable fast and quality integration of acquisitions (in this case, Gillette); increase efficiency and contribute to a high level of corporate governance."
Asked whether the Luxembourg assets were moved from Ireland to avail of a more favourable tax regime elsewhere, P&G said: "No. These assets were transferred to a US legal entity."
The group said it had no plans at the moment to liquidate any other active Irish legal entities.
