The Irish operations of US companies play a critical role in the global success of those firms and will continue to do so regardless of moves to slash corporation tax rates stateside, the American Chamber of Commerce Ireland has said.
Chamber chief executive Mark Redmond said the country's reputation as a location of choice for US business is currently at an all-time high with Ireland continuing to offer a business friendly environment and ease of access to European and other markets.
He said moves by the US administration to reduce tax burdens on business would be seen as good news for the 700 Irish companies with operations in the US.
“The Ireland-US business relationship is not a one-way street - Irish companies are now creating almost as many jobs in the US as the US creates in Ireland,” said Mr Redmond.
His comments come as US president Donald Trump on Wednesday outlined plans to radically overhaul the tax code, in a move that would see the corporate tax rate being cut to 20 per cent in order to encourage companies to return home.
The nine-page framework represents the biggest shake-up of the US tax system in decades with proposals that include lower one-time low tax rates for companies to repatriate profits accumulated overseas.
Louise Kelly, a tax partner with Deloitte Ireland, said while Mr Trump's framework sets out a number of objectives and principles it "lacks the detail required to truly assess the potential impact of such measures."
“The president has signalled a reduction in the corporate tax rate to 20 per cent. This is not as low as was announced previously, and also may not be achievable. A rate of circa 25 per cent may be more realistic. It is likely to depend on whether the rate cut could be partly funded by the elimination of existing deductions/incentives,” said Ms Kelly.
“The framework includes an objective to tax overseas profits as they arise in the future. Without further detail, it is difficult to assess whether this could have an adverse impact on foreign investment but should be monitored here as things evolve,” she added.
Cora O'Brien, policy director at the Irish Tax Institute, said while the proposals are an improvement on the one-page handout issued in April, details remain sketchy.
“It is definitely more of a framework but it is a long way from being a Bill,” she said. “At this point there is no need for Ireland to be overly concerned by the plan but obviously we should be watching out for further developments.
Ms O’Brien also stressed that tax was not the only factor affecting location for US companies.
“They want to be in Europe where there is a market of more than 500 million people and which is showing growth for the first time in years. Multinationals need to service the market from somewhere and doing that from the US operationally-wise isn’t really a runner,” she added.
Liam Diamond, a tax partner at PwC Ireland, was also doubtful as to how much of what has been proposed will be enacted.
“A lot of the colour and commentary around the framework is very political and highly aspirational and there isn’t much detail, particularly in terms of how it might impact here,” he said.
“One thing is clear though and that is any foreign businesses which set up in Ireland are doing it to access European markets and to leverage the single market, both for trade and talent purposes. None of that changes under these proposals and it may well prove to be a big challenge to get the corporation tax down to the desired rate. Even if that were to happen, you’d still have to factor in local taxes, which takes you back to a 25 per cent rate so I’m not sure it would change the appetite of countries to build operations in Ireland,” added Mr Diamond.
