Friday 22 June 2018

Trump plans to cut US rate of corporation tax to 20pc

Proposed move a fresh challenge to Ireland

US President Donald Trump speaking to the media on the South Lawn of the White House yesterday. Photo: AP
US President Donald Trump speaking to the media on the South Lawn of the White House yesterday. Photo: AP
Colm Kelpie

Colm Kelpie

US President Donald Trump has laid out plans to slash the US rate of corporate tax to 20pc in the biggest tax overhaul the country has seen in decades.

The move would boost the competitive position of the US to business, and brings the rate much closer to Ireland's own 12.5pc offering.

Mr Trump has made no secret of his desire to see the corporate tax rate in the US slashed.

Just last month he named Ireland among a list of countries with a low corporate tax rate including France, Germany, Canada, Japan, Mexico and South Korea.

New proposals outlined last night were forged during months of talks between senior Trump administration officials and Republican members in Congress.

The plan would lower corporate income tax rates, reduce the top income tax rate for individual Americans and scrap some widely used tax breaks including one that benefits people in high-tax states dominated by Democrats.

But whether they are passed in their current form remains to be seen, as the Republican party is divided and Democrats are hostile.

The plan offered scant details about how to pay for the cuts without dramatically driving up federal deficits.

Tax reform and bringing US jobs back home was a consistent theme of the president's election campaign, sparking speculation here that Ireland's multinational sector could be affected.

So far, there's been scant progress by the Trump administration on that pledge.

Last month, Mr Trump reiterated his plan to cut the business tax, name-checking Ireland as a destination with a lower rate than America's. Tax experts here, however, have downplayed the impact of a rate cut.

"I think President Trump still has a battle on his hands to get any kind of fundamental tax reform through, particularly following his failure to repeal Obamacare," Peter Vale, tax partner at Grant Thornton, told the Irish Independent.

Attractive

"He'll face issues from those not happy with his plans on how to fund the proposed significant tax cuts and from those who think his proposals favour the wealthy.

"From Ireland's perspective, the proposed cut in the corporation tax rate to 20pc jumps out. It's worth noting that originally 15pc was the target new rate. We would still be of the view that any corporate tax rate cut is likely to land in the 25pc to 30pc bracket."

Mr Vale added that a lower US corporation tax rate would make it more attractive to do business in the US. But he argued the majority of US companies are in Europe firstly for commercial reasons, not for tax.

"In choosing which European country to base their operations, tax is then undoubtedly a factor," he said. "As Ireland continues to have the lowest corporate tax rate, we would see the risk of a significant outflow of US investment from Ireland as low. Similarly we would not expect to see a significant reduction in new US FDI here."

Louise Kelly, tax partner at Deloitte, said a rate cut to 20pc and a repatriation of offshore profits, also proposed by Mr Trump, should not impact on Ireland as a location for investment.

"Ireland's 12.5pc rate, competitive tax regime, availability of talent, track record and access to markets will still be compelling," she said.

Earlier this year former US Senator George Mitchell said moves to reform the US tax system should not be seen as a challenge to Ireland.

A comprehensive tax overhaul has eluded politcians in the United States for decades. The last was passed in 1986.

Irish Independent

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