THE alarm bells should have gone off loud and clear when President Barack Obama named Ireland as one of three countries where the activities of U.S. multinationals and their overseas tax payment policies were being scrutinized.
The relatively sanguine reaction in Ireland to the announcement last week is puzzling. If there is one aspect to Obama so far it is that he means what he says when he pursues a policy.
There is an element of whistling past the graveyard in my opinion in the Irish reaction to the Obama proposals, a kind of “it’ll be all right on the night” approach. That could be a major mistake.
The reality with Obama is that every major campaign promise, including this one to reform American tax policy as it effects overseas earnings, has been followed up in a methodical and direct manner.
Health care, reform of the financial system and immigration reform are being approached in a similar way. He is a new kind of politician, one utterly devoid of sentiment as one insider characterized him to me. There will be no special pleadings or deals as far as he is concerned.
What this means for the Ireland/U.S. relationship is important. The appeal to the long historical links and recent friendships will likely not work.
This is a man after all, who essentially humiliated British Prime Minister Gordon Brown before their first meeting in Washington, D.C. by not giving him a fully-fledged press conference and returning a Winston Churchill bust.
This aspect of Obama has not been fully understood yet. He has come to power relatively unencumbered by the usual favor trading schemes where everyone gets along to go along.
That value matrix has clear advantages too. His ability to turn former opponents such as Hillary Clinton and Joe Biden into allies and cabinet members speaks to this gift and his ability to focus on the best person, unencumbered by personal baggage.
On the down side for Ireland it means that hopes of a special relationship may founder, despite all the St. Patrick’s Day bonhomie. The multinational tax issue will be a test of that.
Senior executives at major multinational companies with bases in Ireland who I have spoken with are certainly deeply worried about the latest Obama initiative. Far more worried, I might say, than the various political reactions in Ireland seem to indicate.
In the immediate sense it probably freezes any major expansion plans for these companies overseas until the shape of the new bill becomes evident.
That in itself will make the job of the IDA, the Irish government group charged with encouraging investment into the country, more difficult at the most difficult of times.
It is also time to plot an alternative strategy if the worst happens. In the long run, it is clear Ireland would have to offer some other kind of powerful incentive to these companies to continue in Ireland if the tax issue is resolved against them and they are forced to repatriate most of their profits. The planning on that needs to start now.
Ireland also urgently needs to beef up its representation across all levels in Washington, D.C. Comparative to other countries the embassy is understaffed and under-resourced, and organizations like the IDA are not even represented.
The government is currently undertaking a review of its diplomatic activities across the globe. There is no question that beefing up Washington and America generally should be top of the list of priorities.
Consideration should also be given to seeking the help of powerful lobbyists, especially on issues so critical to Ireland such as the overseas corporate tax issue.
Almost every other government uses the best that money can buy to get their agenda across in D.C. Ireland should be no different. The reality is that that it is how business is getting done.
This is about much more than the Obama administration. The tax law issues will also be in the purview of key Senate and House figures, all of who will have a major say on the final legislation. It is there, more than with Obama, that the key Irish influence may lie.
It is ironic that Ireland’s best friend currently on this issue is right wing talk show host Rush Limbaugh, who has been castigating Obama daily for his attempts to force American corporations to repatriate profit earnings.
In the brave new world of Obama’s Washington Ireland will have to take their friends where they can find them, and they will likely not be within this administration on this issue.