Multinationals will exit if corporate tax rate jumps
Giant US multinationals may stop investing in Ireland or pull out completely, if our 12.5 per cent corporation tax rate is hiked as part of the bailout, warns Pfizer's Paul Duffy.
Speaking to the Sunday Independent, Duffy said multinationals may think twice about channelling new investment into Ireland if the rate was changed. The country would be facing major credibility and trust issues if it performed a U-turn on the corporate tax rate.
He also warned that smaller multi-nationals -- those that had spent less money to build up operations here -- could look to move to lower tax locations. However, this might take a number of years.
The tax rate was a pivotal reason for many investments in Ireland during the boom years. Pfizer's two biggest overseas investments were both in Ireland, according to Duffy.
However, huge political pressure is coming from Germany, France and Austria for Ireland to hike its corporate tax rates. Our low levels of tax, which lure foreign multinationals to set up in Ireland, have been described as "almost predatory" by French officials last week. A series of our Government ministers have indicated that Ireland will refuse to budge on the low corporate tax rate.
It is also thought that corporate tax allowances, such as research & development credits or the exemption of cross- border patent royalty payments, could also come into focus. These allowances help some companies reduce their tax bill below the 12.5 per cent rate, making Ireland even more attractive compared with other EU members.
Multinationals, ranging from Pfizer and Allergan to Microsoft and Google, provide close to 240,000 jobs in Ireland and account for 55 per cent of all the corporation tax netted by the State. These companies also account for almost 70 per cent of Ireland's exports,so are the most important ingredient in any export-led economic recovery.