Sunday 24 September 2017

'Big relief' here as Trump tax plan drops scheme to penalise imports

White House's single-page reform package lacks specifics

US President Donald Trump speaking after to signing an ‘Antiquities Executive Order’ in Washington DC yesterday. Photo: Getty
US President Donald Trump speaking after to signing an ‘Antiquities Executive Order’ in Washington DC yesterday. Photo: Getty

Donal O'Donovan and Sean Duffy

A border tax that would have hammered Irish exports to the US and risked provoking a global trade war was dropped from the sketchy tax reform package announced by the White House last night.

The previously proposed border adjusted tax would have seen punishing new costs added to goods and services sold into the US.

Its absence from a one-page tax package announced in Washington by Donald Trump's top finance officials was described as a "big relief" by tax experts here.

"It would have been a game-changer for Irish exporters," Joe Tynan, a tax partner at PwC, said.

The Irish economy is unusually vulnerable to the knock-on effects of US tax policy. Mainly US multinationals support around 400,000 Irish jobs directly and indirectly and the US remains one of Ireland's biggest export markets.

Any policy shift that makes it less attractive for US firms to invest abroad or that hurts cross-border trade would hit Ireland especially hard, a concern since Mr Trump's election on an "America First" platform.

Last night, the Trump White House unveiled plans for what officials called the "biggest tax cut" in US history, proposing lower taxes for businesses, the middle class and the wealthy.

But the one-page policy document presented by the White House left details of when the cuts will be implemented, over what time frame or how they will be paid for all unanswered.

Mr Trump's top economic adviser Gary Cohn and Treasury Secretary Steven Mnuchin set out a list of tax priorities.

These included wanting to slash US corporation tax to 15pc from 35pc, a one-off tax deal to bring home $2.6 trillion in profits parked offshore by corporations, and a longer-term shift to tax US companies' profits under what is called a territorial system, in which most foreign profits would be exempt from US taxes.

Read more: Trump pledges to cut US corporation tax to 15pc- but fails to explain how

A territorial system would end practices that currently distort the global tax system, including US corporations shifting their tax domiciles to Ireland to cut bills.

While corporate tax changes are a major issue here, much of the focus in the US plan was on individuals, including scrapping death duties and cutting income tax rates.

"This is going to be the biggest tax cut and the largest tax reform in the history of our country and we are committed to seeing this through," Mr Mnuchin said at an event in Washington yesterday.

Implementing the plan will depend on hard-to-come-by support from the US Congress without clarity on how tax cuts will be funded, as well as coming up against rules aimed at preventing tax plans that will add to the US federal deficit in the long term.

The White House said it would hold "listening sessions" with stakeholders throughout May in relation to the proposals. "We are determined to move as fast as we can and get this done this year," Mr Mnuchin said. He indicated that the tax plans would fund themselves by stimulating economic growth, though again without providing detail.

The scant detail made it difficult to immediately assess its economic impact. Kyle Pomerleau, director of federal projects at the Tax Foundation said in a Twitter message: "Sorry, friends. We cannot model this. Definitely not enough detail."

Implications

The need for detail in order to be able to assess the implications for Ireland was also raised by officials here.

"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," a spokesman for the Department of Finance 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," he said.

Irish Independent

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