Obama corporate tax reforms may hinder FDI into Ireland
PRESIDENT Barack Obama took aim at US companies based in Ireland and other low-tax countries yesterday, prompting fears that his measures may deter foreign direct investment here.
Facing elections in November, Mr Obama unveiled a series of measures last night to tax American companies operating overseas. The president's proposed reform of America's corporate tax code includes a minimum tax on profits made by US firms overseas -- negating one of the key reasons for many US companies to set up in Ireland.
A White House official said the measure was to discourage "accounting games to shift profits abroad" or actual relocation of production overseas.
The "accounting games" are believed to be a reference to the now notorious 'Double Irish' tax avoidance scheme. The scheme, which is completely legal, is used by numerous American firms based here, including Google.
The 'Double Irish' sees a multinational use subsidiary companies to route its overseas profits through Ireland and on to a tax haven, such as Bermuda or the Cayman Islands, in the form of royalty payments on which no corporation tax is due here or in the US. The White House named Ireland in a report on tax avoidance a few years ago, prompting the Irish Government to begin lobbying in Washington against changes to the tax code.
Mr Obama is also planning to reduce the top rate of corporation tax in the US to 28pc from 35pc. Bloxham Stockbrokers economist Alan McQuaid said the changes would be seen as a threat to Irish investment.
"Government and the IDA have acknowledged our tax regime is one of a number of attractions to companies here, and something like this will be seen as a threat."