In the wake of St. Patrick’s Day, I’m left thinking about Ireland and all the Canadian entertainment companies that have set up shop there over the past several years. Well actually, what’s really got me thinking about the Celtic country is Alliance Atlantis jetting Ted Riley off to Dublin to open a new operations office – not that there’s anything peculiar about a man named Ted Riley taking up residence in Ireland. The truth is, while none of the the seniors at AAC, including Riley, were willing to talk to me about the move and the AAC spokesperson insisted that human resources and ease of travel were top of mind, it’s pretty clear that once again Ireland’s glorious tax incentives are the name of the game.

Over the last few years, AAC along with other major Canadian entertainment giants, like Nelvana, Cinar and Sullivan, have opted to set up offices in Shannon, Ireland – otherwise known as the Shannon Free Zone. There, they are privileged to the lowest corporate tax of 10% in the EU, no duties on goods exported to non-EU countries, as well as a double taxation agreement between Ireland and Canada, which provides that any dividends, interest or royalties paid to an Irish company suffers minimal, if any, withholding tax. In other words, foreign owners can receive the after-tax profits without any further tax payable by them in their home country.

While these incentives have made Shannon an ideal location for some of our more coveted entertainment companies (although Cinar is currently in the process of closing its Shannon office), a coming change in Irish tax rates is soon to put the rest of the country, including Dublin, on a level playing field.

In response to Shannon’s tax incentives, the EU commission had raised a big stink about inequity, and in 1998 an agreement was reached that would bring the 10% corporate tax rate in Shannon up to 12.5% by Jan. 1, 2003 and reduce the corporate tax rate in the rest or Ireland (that’s traditionally been at 20%) to 16% by Jan. 1, 2002, and 12.5% by Jan. 1, 2003.

But for companies that set up in Shannon before July 1998, which AAC did, the 10% rate is extended to Dec. 31, 2005.

So now the picture is coming together. AAC keeps its Shannon office until it runs its course with the 10% rate, and in the meantime, sets up shop in the more cosmopolitan Dublin, where it will eventually enjoy the same rate as Shannon and where it can station its mind and management. Once the areas are equalized, it will roll the Shannon office into the Dublin digs, all the while increasing its operations and increasingly reducing its corporate income tax.

Of course I’m only speculating, but it does seem logical that AAC, like any fiscally minded Canadian company, would be looking for ways to reduce its heavy tax burden, and it’s no secret that it’s been increasingly successful at it for years – according to the company’s latest annual report, its corporate tax rate for fiscal 2001 was approximately 28%, compared to 33.1% in fiscal 2000 and 50.4% in fiscal 1999.