Thursday 25 December 2014

Bruton defends tax regime and says US should fix its own code

Reuters

Published 26/07/2014 | 02:30

US President Barack Obama arrives to the stage to deliver remarks on the economy at Los Angeles Trade-Technical College on July 24, 2014 in Los Angeles, California.
US President Barack Obama arrives to the stage to deliver remarks on the economy at Los Angeles Trade-Technical College on July 24, 2014 in Los Angeles, California.

Ireland defended its tax regime yesterday against criticism from US President Barack Obama, insisting that it does not seek to entice American companies to make the country its domicile to lower their tax bills.

Singling out Ireland for strong criticism, Obama on Thursday hammered US companies that avoid federal taxes by shifting their tax domiciles overseas and called on Congress to pass a bill to curb such deals, known as "inversions".

Investment from multinationals, whose employees account for some 10pc of Ireland's workforce, is a central plank of Irish economic policy and the head of the country's investment agency has warned that inversions could damage its reputation.

Jobs Minister Richard Bruton said Ireland would welcome changes to US tax law to stop multinational companies cutting their tax bills.

"I don't think there would be any loss to Ireland should there be a change by the US and I think most people would welcome a change," Mr Bruton said.

"It is something Ireland would support, and the president is seeking to make such changes," he said.

"Ireland has a very robust strategy for attracting foreign companies who invest substantively, put real investment into the ground and provide employment," Mr Bruton told reporters.

"That is very different from what has been discussed in recent days around tax inversions.

"Ireland does not promote such investments and nor do we want such investments. They actually cost us money and we derive no benefit from them."

"Inversion" deals occur when an American company acquires or sets up a foreign company, then moves its US tax domicile to the foreign company and its lower-tax home country, most often Ireland, Britain, Switzerland or the Netherlands.

Inversions are still rare, but are becoming more common and deals like Medtronic Inc's $42.9bn takeover of Irish-domiciled Covidien led to a near six-fold rise in the value of Irish-based mergers and acquisitions (M&As) in the first half of the year.

Mr Bruton said Ireland derived no benefit from inversions and that it was an issue that needed to be fixed but could only be resolved by changes in Washington to the US tax code.

Several Democrats have offered bills to curb inversions, calling for a rule change that would deem any company with half of its business in the United States to be US-domiciled.

But no new law is likely to result as long as Republicans contend that inversion rules need to be part of a broader overhaul of the tax code, policy analysts say.

Reuters

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