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Irish economy at risk in Obama tax plan

Plans to close corporate tax loopholes will have serious implications for Ireland

By
CONN CORRIGAN,
IrishCentral.Com Staff writer

Published Monday, May 4, 2009, 12:16 PM
Updated Thursday, July 23, 2009, 5:39 PM

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Pfizer - a U.S company with Irish operations that objects to Obama's plans to end tax breaks for U.S companies oversees
Photo by Photocall

Irish expert slams Obama tax plan as 'wrongheaded' Read More

US President Barack Obama has spelled out plans to close corporate tax loopholes on U.S. multinational corporations and crack down on overseas tax havens.

The new move will have serious implications for the Irish economy which is heavily dependent on the multinationals.

Obama spelled out the Irish dependency today when he said that U.S. companies in just three countries; Ireland,  Bermuda and the Netherlands, reported one-third of all foreign profits.

At present, U.S companies can avoid paying taxes on profits earned abroad if they put those profits back into their overseas subsidiaries.

Obama's new tax plan is expected to raise $100 billion in revenue over 10 years.  

U.S companies have taken advantage of Ireland’s low corporation tax – at 12.5 percent – and invested heavily in Ireland, making the country one of the top locations for U.S investment in Europe.

Ireland’s low corporation tax, which was left unchanged in its recent supplementary budget, has been a source of tension with other European Union countries, who want harmonize corporation tax rates across Europe.

A study in the U.S journal Tax Notes found that from1999-2002, Ireland was the most profitable country for U.S corporations. During those years, profits by U.S companies in Ireland doubled from $13.4 billion to $26.8 billion.

The author of that study, Martin Sullivan, described Ireland as a “semi tax haven” and noted that for that same period, profits for U.S companies in most of the rest of Europe fell.

Major U.S. companies, such as Pfizer in Ireland, lobbied Congress in March to voice their concerns at the changes to the tax code, arguing that it would make U.S firms less competitive.

They said that the proposed changes would mean that their foreign competitors, many of whom are not obliged to pay taxes on the profits they make from their overseas operations, would have a new competitive advantage.

In March, Treasury Secretary Timothy Geithner told the Senate Budget Committee that the changes would make it harder for U.S. companies to avoid taxes.

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See more: news, irish news, irish business, Obama, tax, recession

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