Business Irish

Saturday 23 June 2018

Trump's tax plan slows down US jobs to Ireland

IDA chief warns firms are rethinking plans to invest here

President Donald Trump with first lady Melania Trump welcomes Taoiseach Leo Varadkar of Ireland, upon arrival at the White House, Thursday, March 15, 2018, in Washington. (AP Photo/Manuel Balce Ceneta)
President Donald Trump with first lady Melania Trump welcomes Taoiseach Leo Varadkar of Ireland, upon arrival at the White House, Thursday, March 15, 2018, in Washington. (AP Photo/Manuel Balce Ceneta)
Gavin McLoughlin

Gavin McLoughlin

Donald Trump's policies are causing US businesses to rethink their plans to invest in Ireland, IDA boss Martin Shanahan has starkly warned.

Mr Shanahan urged caution over Ireland's ability to attract vital foreign direct investment, saying the country cannot afford to be complacent.

Ireland is facing more competition from other countries, and US businesses are slower to make decisions about investing here because of the US president's policies.

"We have seen a slowing of decision-making coming out of the US and our read of that is that US companies are taking stock," he said.

"They are looking at the new tax rules which they're now subject to in the US and they are, as one company put it to me, running the numbers again to see what that now throws out in the context of the new tax regime."

But he said the number of companies looking at Ireland has not yet been affected, and his ambition is that if companies look to set up outside the US to find new markets, Ireland will be the place they choose.

IDA chief Martin Shanahan says US firms are taking stock. Photo: Mark Condren
IDA chief Martin Shanahan says US firms are taking stock. Photo: Mark Condren

At the end of last year Trump enacted a sweeping reform of the US tax system, slashing the country's corporate tax rate. He also made changes to the way some foreign earnings are taxed as part of a drive to bring US business back to American soil.

Mr Shanahan, the head of the State body responsible for encouraging for eign investment into Ireland, was speaking as the agency announced strong results for the first half of the year, with the number of projects won increasing to 139 from 114.

But he warned that ongoing geopolitical turmoil is causing a reduction in investment into Europe.

"We see all countries large and small vying for these investments. We see them all improving their offering in multiple different ways," Mr Shanahan said.

"We also see some moderation in investment into Europe given what's going on in the world. So as well as being a very competitive environment, the amount of foreign direct investment to be won may moderate into the future."

He said Ireland "cannot be complacent" about maintaining its competitiveness with other countries.

It comes after Ireland slid down the rankings in a recent international competitiveness report.

Mr Shanahan said issues flagged with him by companies included the housing crisis, and the level of personal taxation in this country.

"Unless Ireland stays competitive, we will not continue to see these investment numbers. It's as simple as that," Mr Shanahan said.

Mr Shanahan criticised comments from Ashoka Mody, the former head of the IMF's operation in Ireland, who has said in a new book that Ireland needs to develop a new model for economic growth.

Mr Mody argues the country is too reliant on using low corporate taxes to attract business. This means Ireland is exposed to ongoing global changes in how companies pay tax, according to Mr Mody.

"With all due respect to Mr Mody, he may be underestimating Ireland's attractiveness aside from taxation and the taxation regime," Mr Shanahan said.

"Foreign direct investment has been extraordinarily important for this country.

"It has developed the country to where it is now," Mr Shanahan added, before saying the presence of multinationals had helped Irish companies to do more business.

Business Minister Heather Humphreys said the Government was "always mindful" about the tax base and the large contribution made to the public finances by foreign companies.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business