Uncertainty is the biggest threat after Obama tax proposals
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Most Irish people tend to be Democrats at heart (JFK through to Clinton through to Obama) but when it comes to US tax policy, the laissez faire Republican approach has tended to suit Ireland better.
Barack Obama's tax proposals on Monday were not a bolt from the blue -- this was a theme he had reiterated many times on the campaign trail -- but a presidential announcement carries an awful lot more weight than any aspirant's utterings.
On the (very) positive side, Obama didn't go as far as eliminating the US concept of deferral.
Foreign profits
There had been suggestions that this deferral concept would be abolished and that US tax would be charged irrespective of whether such foreign profits are repatriated or not.
As a US company's Irish profits would then be subjected to US tax, the benefit of the 12.5pc rate would disappear and with it our most potent weapon in the competitive global tax environment.
It would also be bad news for countries with a lower tax rate than America.
That big worry has passed and it now looks as if deferral as a concept is safe for the foreseeable future.
On the negative side, we're right in the mix for these proposed changes and it was not helpful that the press release accompanying the Obama announcement named Bermuda, the Netherlands and Ireland as accounting for one third of all foreign profits reported by US companies.
It is also not helpful that his announcement covered a mix of tax haven proposals, into which Ireland most definitely does not fall, and "removing incentives for shifting jobs overseas".
The Cayman Islands (a particular target of Obama) we most certainly are not, but the changes which would level the playing pitch between companies who create jobs in the US and those who create them elsewhere would affect countries like Ireland that offer competitively low corporate tax rates.
The big negative, however, is the uncertainty that has now entered the equation.
Unlike the Irish parliamentary system, Obama is but one player -- albeit a major one -- in the Washington cauldron.
The new changes will have to be passed by Congress and they are not due to be introduced until 2011.
Over the next few months we can expect a lot of back and forth before brokers craft a final version.
In addition, opposition from big business to the proposals is emerging from firms which generally are a formidable and effective lobby on Capitol Hill.
You can expect that the Department of Finance, as well as riding the coat tails of these representations, will also be quietly crafting its own behind-the-scenes plan to influence the process.
There is a long game here and this is not something that will be settled for many, many months.
Overall, the glass is still well more than half full -- but we have to keep our eye on it.
- Feargal O'Rourke
