Trump pledges to cut US corporation tax to 15pc- but fails to explain how
The White House has confirmed that President Donald Trump will seek to lower US corporation tax to 15pc as part of his tax reform plans.
Details released on Wednesday by the White House show that in addition to the lower 15pc corporate tax rate, Trump also wants to offer tax cuts to average Americans.
Under US law, only Congress can make major changes to the tax code. Lawmakers initially greeted Trump's plan as a starting point for further discussion on overhauling the tax rate for large corporations.
During a briefing at the White House US Treasury Secretary, Steve Mnuchin, failed to provide detailed information on how the reforms would be implemented, but insisted the Trump administration was working in tandem with Congress to iron out the final details.
Mr Mnuchin also declined to clarify the administration’s position on a mooted border tax that would have major implications for companies sending goods to the US from Ireland.
He said there would be a “one-time” tax applied to US profits held overseas that he claimed would generate “trillions of dollars” in revenues for the government.
A reduction to 15pc would bring the US rate down close to Ireland’s rate of 12.5pc, which is the lowest of any developed EU State. However, analysts have said that many of the US companies based here choose Ireland as hub because of its role within in the EU, a fact that will remain whatever the outcome of the US reforms.
Reacting to the news that the much-talked about lower corporation tax rate is to be pursued by the president, a spokesman for the Department of Finance said the details of the full changes would determine their impact on Ireland.
"The exact implications of US tax reform for Ireland, and the rest of the world, will depend on the exact nature of any changes which are ultimately agreed," the spokesman said.
"Ireland’s membership of the EU is, and will remain, a key factor in attracting FDI from the US and elsewhere. Global business, from the US or elsewhere, will always want to have operations in the EU, and Ireland will remain very competitive and attractive as an EU location to invest in and do business from."
American Chamber CEO, Mark Redmond, outlined what the 15pc US corporation tax rate could mean for the US multinationals operating here.
"It’s important to point out that it is a proposal at this stage and has yet to be passed by Congress and Senate," Mr Redmond told Independent.ie.
"US companies operating here have made deep investments in their businesses here over many years. What we hear from our US corporate leadership is that their Irish operations and their teams here continue to be critical to their global commercial success
"A key factor is that Ireland is their base from which to trade into the EMEA markets. Ireland has always performed very strongly in the global battle for FDI, offering tax certainty and, even more importantly to our members, access to a strong talent pool of employees. On that basis, we believe they are and will remain strongly committed to their Irish operations."
Mr Redmond said he believes US multinationals will continue to work in Ireland.
"We can’t speculate on what might happen in the future, but Ireland has always competed very successfully on the world stage for US FDI. While it is very important not to be complacent, and we must constantly look for ways in which to improve our competitiveness, we expect that the Irish Government and the IDA will remain committed and successful in the pursuit of US FDI opportunities for Ireland."
Meanwhile, Ibec's Director of Policy and Public Affairs, Fergal O'Brien expressed skepticism about the US administration's ability to deliver what they are promising.
"There will be plenty of obstacles to overcome to reach implementation stage of the proposal to cut the US headline corporate tax rate to 15pc; not least that it represents a massive fiscal cost of $2 trillion over its first ten years.
"Even if the US succeeds in delivering a substantial rate cut, the proposition for US firms to invest in Ireland remains compelling."
Ireland’s low rate of tax for corporations has resulted in a huge influx of US firms over the past couple of decades.
Mr Trump heavily criticised US firms who sent jobs overseas during his election campaign and has since followed that up with an executive order known as “Buy American, Hire American.”
Speaking at an event held prior to the announcement Ms Mnuchin had said the lower corporate tax rate was "what the President said on the campaign".
"He thinks that absolutely critical to drive growth.”
US companies employ more than 140,000 people directly in Ireland, and Ireland's favourable corporate tax rate of 12.5pc has long been viewed as one of the biggest incentives for US companies here.
Additional reporting by Reuters