Johnson Controls is now an Irish company. That’s a long way from Milwaukee, where it’s been doing business since it was founded in 1885. And it took considerable maneuvering to pull that off.
The move is the result of a controversial $14 billion merger with Tyco, based in Cork, Ireland, that finally closed at the beginning of September. The deal created a giant building-products conglomerate, offering heating and air conditioning systems, fire protection, and security technology, and will generate more than $30 billion in annual revenue.
But this merger attracted attention because it’s the latest in a series of so-called “inversions,” which allow a company to dramatically lower its tax bill by relocating its headquarters outside of the U.S. The new Johnson Controls can now avoid paying U.S. taxes on income earned overseas, but still has to pay American taxes on U.S. profits. Ireland has one of the lowest corporate tax rates in the world. The U.S. has the highest. Johnson Controls says the switch will save the company $500 million over the next three years. No wonder the deal triggered a lot of controversy and high-level criticism by President Obama, as well as presidential candidates Hillary Clinton and Donald Trump.
Johnson Controls CEO Alex Molinaroli tells Fortune’s Susie Gharib that the culprit is the American tax system. He says it needs to be fixed.
“I’m not looking to leave the United States,” says Molinaroli, who will head the new company. “But if we have a tax system that is fair, that doesn’t punish someone to be a global multi-industrial, that doesn’t disadvantage a U.S. domiciled corporation competing with other multi-industrials, then you wouldn’t see this.”