Business Irish

Thursday 12 December 2019

Trump reforms will make US more attractive, warns IDA boss

U.S. President Donald Trump. Photo: Reuters
U.S. President Donald Trump. Photo: Reuters

Colm Kelpie

US tax reform will make that country a more attractive destination for business, the head of the IDA has warned.

Martin Shanahan said US authorities will be hoping firms will now decide to stay in America, rather than invest in Ireland or Europe.

But he said he doesn't' see a significant impact on Ireland.

Just days before Christmas the Republican-controlled US House of Representatives gave final approval to the biggest overhaul of the US tax code in 30 years.

In addition to cutting the US corporate income tax rate to 21pc from 35pc, the debt- financed legislation gives other business owners a new 20pc deduction on business income and reshapes how the government taxes multinational corporations along the lines that the country's largest businesses have recommended for years.

"Let's be honest. This is an effort to make the US more competitive. It will make the US more competitive," said Mr Shanahan.

"That may mean that there are some marginal calls which they hope a company will decide to stay in the US rather than come to Europe or Ireland. Does it signal a significant change from an Ireland perspective? I don't think so."

Mr Shanahan said the IDA will wait to see how the US Treasury and the Internal Revenue Service (IRS) interprets the bill, which he described as a "very significant reform".

But he said he does not see it as being as significant an issue for Ireland as it might have been.

"It isn't all about tax, which we continually say. Many of the decisions we saw in the latter part of the year were made in full knowledge of what was coming through in the taxation bill. It hasn't dissuaded investors. I can tell you sitting here today that I expect the next couple of months to be strong in terms of investments, and again, those decisions have been made in full cognisance of what was coming down the road."

Mr Shanahan also said the UK was no longer as much a competitor as before for FDI as a result of the Brexit vote.

He said it could be the end of this year, beginning of next year before we see jobs materialising as a result of Brexit related investments here.

"You must remember a lot of the Brexit-related wins, they have to go through licencing process, regulatory process and while there might be some headcount added at the moment to manage that process, the headcount that will come will probably start later this year, into next year."

It comes as Davy Stockbrokers has said the tax changes passed in the US are more beneficial to Irish building materials group CRH than initially expected.

It predicted that the group's effective tax rate should fall by at least 3pc from the current rate of about 28pc.

"CRH's finance director had indicated that the group effective tax rate could fall anywhere from 0.5pc to 3pc dependent on the final legislation," said Davy analyst Robert Gardiner in a note to investors.

"Late changes to the bill suggest a more favourable outcome and we suspect that the group's tax rate will fall by at least 3pc as a result."


IDA taps EY to monitor DC moves

Lawyers and experts with EY in Washington DC have been tapped by the IDA to closely monitor developments on Capitol Hill as Donald Trump pushes through his US tax agenda.

The consultants have a long term relationship with the agency to monitor policy developments in Washington that pre-dates the current US administration.

The IDA also says that it works closely with the Irish embassy in Washington, and the Department of Finance.



Irish Independent

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