|President Barack Obama meets with Senator Kennedy and former President Clinton to discuss national service on April 21, 2009.
The US Chamber of Commerce in Ireland said that it is too early to tell what impact President Obama’s proposed tax changes will have on US multinationals operating in Ireland. However, the Chamber side-steps the surge in profits in the past decade, which have been unrelated to the growth of economic activity in Ireland.
“President Obama’s speech did not have specific details on how the proposed reforms will work and the devil will be in the detail”, said Pat Wall, chair of the American Chamber’s Taxation Group. “It will be 2011 before any proposals become law and there will be much discussion and lobbying on Capitol Hill in the meantime. It will be vitally important that the Irish government make its voice heard and that the debate is watched closely from an Irish perspective”.
“What we can deduce from his statement is that the proposed changes to deferral of tax on foreign profits is not as severe as had been anticipated and this will be of benefit to US companies operating in Ireland”, he said. “The rules of the game have changed but they have changed for everyone. The proposed changes will impact every jurisdiction and Ireland will continue to maintain its relative tax competitiveness which has been very important in attracting foreign direct investment (FDI). The Government must continue to voice its intention to maintain Ireland’s 12.5% corporate tax rate – which is available to all companies, not just multinationals. In the current global economic climate President Obama’s proposals remind us once again of the need for Ireland to continue to improve its cost competitiveness. We welcome the recent improvements to the Irish Research and Development tax regime and we anticipate further good news on an intellectual property deduction in the Finance Bill this Thursday”.
“What is most interesting is the reaction in the US where some commentators are already questioning whether the proposals will achieve President Obama’s stated objective of ensuring that US companies remain the most competitive in the world”, he added.
“The fact that President Obama referenced Ireland in his speech means the US administration is aware of the success of Ireland’s policy of adopting a very competitive corporate tax rate. However it also served to highlight the difference between Ireland, where US companies have substantial operations here and the Netherlands which is a preferred location for US holding companies with very little business operations and Bermuda which is a recognized tax haven”, he added.
The Chamber says Ireland is a transparent and open low tax jurisdiction with tax treaties with over 40 countries including the USA. US multinationals operating in Ireland have substantial businesses here employing approximately 100,000 people and account for a significant amount of exports from Ireland. US firms, in 2007, exported an estimated €83bn of products and services from Ireland into world markets. US firms paid over €2.5bn to the Irish Exchequer in Corporate Tax (or approx 40% of total corporate tax take in 2008 and contributed a further €13bn in expenditure to the Irish economy in terms of payrolls, goods and services employed in their operations.
Equally important is Irish investment in the United States. Irish companies directly employ an estimated 80,000 (CRH is responsible for more than 50% of this figure) in 200 companies and over 1,300 locations in all 50 States across the USA. The cumulative stock of Irish foreign direct investment (FDI) in the US stood at $33.5bn in 2007. The US is one of Ireland’s top export destinations with total bilateral trade in 2008 (exports to + imports from the USA) worth €23bn.
“The US administration is aware of the importance of this relationship and of the long standing relations between our two countries. I believe that they will be aware of this when looking at how their proposals will impact on the global competitiveness of US multinational companies with operations in Ireland,” said Wall.
Pat Wall avoids a very pertinent fact: US Bureau of Economic Analysis data shows that the combined net profit of US corporations in Ireland was $8.58 billion in 1997, $13.39 billion in 2000 and reached $31.3 billion in 2003 - - despite a slowing in activity because of the high tech bust. The $48 billion net profit in Ireland in 2005 compares with $37.01 billion in the UK and $74.06 billion in the Netherlands. US companies in Germany reported net profits of $11.22 billion in the same period while French operations made $9.52 billion and their Italian operations made $8.58 billion.
The huge rise in US profits in Ireland has not been correlated with a related increase in activity by US-based firms in Ireland.