Donald Trump's $1.5trn tax reform to hit Irish firms hard
Irish companies with a substantial foothold in America could be hit hard by US President Donald Trump's $1.5trn (€1.2trn) tax cut package, according to tax experts here.
Under the monumental tax reform plan, which is set to be signed into law by Christmas, America's corporation tax rate will fall from 35pc to 20pc - above Ireland's 'red line' corporation tax rate of 12.5pc.
However, a raft of changes, including to the treatment of valuable intellectual property assets - US firms will be taxed at a special low rate of 12.5pc on their IP in a bid to get them to bring those assets back to America - is set to affect Irish firms selling goods and services into the US. "Irish Plcs who have substantial operations in the US will be affected," said Joe Tynan, head of tax at PwC.
The two-way trade between Ireland and the US has increased in recent years and is now valued at more than $590bn (€495bn).
Irish firms such as CRH and Glanbia have invested more than $85bn (€71bn) in the US, and employ more than 80,000 people across 50 states.
Mr Tynan said that while Irish companies with a presence in the US will benefit from the corporate rate reduction, they will be negatively affected by reforms that reduce the interest deduction that is allowed to a proportionate amount of their global interest payments.
"As most Irish companies borrow in the US rather than Ireland, due to the higher tax deduction, this will have a significant impact," said Mr Tynan.
"The US tax changes also reduces the payments that can be made by a US company to a connected company for services, royalties and in the House bill for goods. This could also negatively affect Irish companies selling into the US."
In the early hours of Saturday, the US Senate passed a sweeping tax overhaul bill notwithstanding concerns that it could generate a deficit of $1.5trn within a decade.
One Republican, Tennessee Senator Bob Corker, voted against it on deficit concerns.
Mr Trump repeatedly singled out Ireland in the run-up to the passing of the Tax Cuts and Jobs Act 2017. In October, he told reporters in the White House: "I hear that Ireland is going to be reducing its corporate rates down to 8pc from 12pc."
Taoiseach Leo Varadkar, who insists that the overall trade flows between Ireland and the US are "remarkably balanced", later told the Dáil: "I can confirm that President Trump's claim that we are proposing to reduce our corporation profit tax to 8pc is indeed fake news".
Multinationals' tax avoidance strategies are a key issue for European lawmakers, including Competition Commissioner Margrethe Vestager.
However, it is a proposed EU-wide digital tax on internet companies, fiercely opposed by Ireland, that could prove to be the biggest threat to our FDI offering. The digital tax will be discussed by European finance ministers, including Finance Minister Paschal Donohoe, in Brussels tomorrow.
Yesterday, Ireland received a "red card" from a new report examining the tax and transparency policies of the European institutions, 17 member states and Norway.
'Tax Games - the Race to the Bottom: Europe's role in supporting an unjust global tax system 2017', was produced by civil society organisations in countries across Europe, including Ireland.
Maeve Bateman, director of Debt and Development Coalition Ireland, which prepared the chapter on Ireland for the report, said Ireland still has tax structures that multinationals can use to avoid tax.