IDA to lobby US for limited changes to new tax rules
Government needs to show we are not a 'tax haven' for multinationals
President Barack Obama listens to Timothy Geithner, treasury secretary, speak about tax reform at the White House in Washington, yesterday.
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Wednesday May 06 2009
THE Industrial Development Authority (IDA) parachuted top executive Kieran Donoghue into Washington last weekend ahead of the sweeping new changes to US tax rules announced earlier this week, which could affect American firms working here.
Mr Donoghue will play a key role in lobbying for limited changes to so-called "tax deferral" rules being introduced in the US, in a bid by the Obama administration to bring jobs and taxes back to America.
Mr Donoghue is one of eight executive committee members at the IDA who run the body.
Debate on the tax changes is expected to heat up in the coming days but the changes did not go as far as many had feared.
As it stands, US multinationals like Microsoft, Google, Pfizer and hundreds of others can avoid paying tax on profits earned overseas until the money is repatriated to the US.
In many cases these companies keep the money outside the US to invest abroad which means they never pay taxes on it.
While some tax experts had feared a complete repeal of tax deferral, President Obama's administration is instead seeking to sharply limit the tax deductions that companies taking advantage of the deferral can take.
Preparation
"We have been preparing for this for months," said Barry O'Leary, chief executive of the IDA. "We also have three tax experts based in Washington focusing on the issues."
Mr O'Leary added that Foreign Direct Investment (FDI) should still remain strong in Ireland although it is likely that US multinationals operating here will have to pay more taxes in some form as will others in other overseas locations.
He added that one of the key issues for Ireland is that US multinationals have substantial investment in physical assets or human capital, unlike in many other locations and tax havens being targeted by the new tax changes.
Multinationals operating in Ireland paid €2.5bn in corporation tax in 2008 -- or 40pc of the total take last year -- according to the latest IDA figures. Many have been attracted by our low corporation tax of 12.5pc, which is one-third of that in the US.
These firms employ just under 100,000 people here and have $87bn invested in Irish operations, up from $36bn in 2000.
Yesterday, the American Chamber of Commerce, which represents these firms, called on the Government to step up its lobbying initiatives a gear.
"The most important thing is that we were not lumped in as a tax haven," said Pat Wall, chairman of the American Chamber.
"This had to be explained to the US Government. It is up to us to maintain our relative advantages and set our own agenda. We are still in the game as a serious player as a low tax economy."
- Ailish O'Hora Business News Editor
