Fear for thousands of jobs as Obama wants to hit our business tax rates
Published 08/05/2014 | 02:30
US PRESIDENT Barack Obama is determined to end the tax advantages enjoyed by American multinationals operating in low-tax economies like Ireland, his top economic adviser said.
White House adviser Jason Furman outlined the White House's dissatisfaction with US companies taking advantage of low-tax countries.
Ireland must attract foreign investment solely on the basis of its skilled, English-speaking workforce and proximity to Europe rather than on low taxes, he told the Irish Independent.
"We are very focused on the issue of corporate taxation," said Mr Furman, who is the chairman of the influential US Council of Economic Advisers.
"If a company wants to come to Ireland for Ireland's talented workers, regulatory regime, access to Europe – that's a really great reason to locate in Ireland," he added.
"If they're coming here just for the tax rate . . . it would be more efficient for them to be where they're most productive, not where they're paying the lowest taxes. That's the goal (of our plans)."
Hanging in the balance are thousands of Irish jobs. American companies operating in Ireland employ about 115,000 people directly, according to the Irish Chamber of Commerce, with a particularly strong presence in the pharmaceutical and technology sectors.
The country's attractive tax regime is seen as a key motivator for this, heavily promoted by investment agency IDA Ireland.
Mr Obama wants US companies which pay 12.5pc tax in Ireland to pay another big chunk in taxes to the US authorities so that they are effectively paying the same rates as US companies based at home.
"The concept is that if you are investing in a country with a robust tax system, you wouldn't necessarily face any US taxes. But if operating in a country with a less robust tax system, you would have to pay US taxes," said Mr Furman.
The issue has become a political hot potato on both sides of the Atlantic. In the US, debate over American multinationals' tax strategies is at an all-time high.
Companies such as Apple, Google and Oracle have come under intense public scrutiny on the issue, accused of slashing American jobs by deciding to expand in low-tax jurisdictions such as Ireland and Switzerland rather than stay in the US, which has one of the highest corporation taxes in the world at 35pc.
Back in Ireland, the Government has come under unprecedented pressure to defend its tax strategy.
Since the beginning of this year at least two studies have been released arguing that multinationals resident in Ireland pay out just a fraction of their earnings in taxes.
A research paper issued by Trinity College Dublin finance professor Jim Stewart this week found that large subsidiaries of multinationals like Apple which are based in Ireland are able to escape paying corporation tax due to an "exceptional" interpretation of tax laws by the Revenue Commissioner.