Tuesday 20 August 2019

Colm Kelpie: US firms not going home in the morning - but future is under threat

Apple's offices on Half Moon Street in Cork city PAUL FAITH/AFP/Getty Images
Apple's offices on Half Moon Street in Cork city PAUL FAITH/AFP/Getty Images

Colm Kelpie

Donald Trump's victory speech was noticeable for what it lacked - the remarkably forceful declarations which characterised his public campaign utterances.

It sparked the question - would Donald Trump the President be as strident in his policies as Donald Trump the candidate?

The remarks from Stephen Moore - a senior economic advisor to Mr Trump - suggests that in some areas, the rhetoric may yet become reality.

Moore told the BBC that the new administration would follow through on the campaign pledge of slashing America's high corporate tax rate - the highest in the developed world - precipitating a "flood of companies" to leave Ireland and other countries and return to the United States.

Given the significant presence US companies have in Ireland, and the level of employment they have provided, the comments are concerning. Collectively, US investment here amounts to $343bn, directly supporting 140,000 jobs, according to the American Chamber of Commerce.

The multinational sector is a fundamentally important component of the Irish economy, and our low 12.5pc rate has been a key tool in ensuring its continued success.

A cut to the US rate - especially a cut of the magnitude touted by Mr Trump - arguably is a risk to that policy.

Whether it is of sufficient threat to, as Mr Moore suggests, precipitate a mass exodus of companies that have in some cases a sizeable base here, seems highly unlikely, experts say.

Large employers like Microsoft, Apple, Pfizer and Intel have been here for decades and have very established operations. It's hard to see them suddenly shutting up shop and shipping back across the Atlantic.

The Government has repeatedly pointed out that multinationals are here for more than simply the low tax rate (even if it is a considerably enticing factor). They have access to the European market, an educated workforce and are closer in terms of timezones to the Asian market. But the fight for future investment is a concern.

Both parties in the US would love to stop the flight of American companies overseas, but they've never managed to agree on how to do it.

Now that the Republicans control Congress, the Senate and the White House, and Trump has made returning jobs to the US a cornerstone pledge, the international investment environment looks set to be altered.

While existing US companies may stay put, enticing future investment may get more difficult. Firms may feel under pressure to spend more money increasing investment in the United States, instead of expanding overseas.

This could be particularly true if Mr Trump follows through on his pledge to give companies a one-time opportunity to pay just 10pc tax to bring home profits. And that could make it harder to attract future US investment, unless, as one tax expert pointed out, Ireland's non-corporate tax offering is particularly attractive. Trump's ascension to power once seemed implausible, and his rhetoric dismissed. We do that now to our peril.

Irish Independent

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