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Updated at 9.55pm
THE GROUP THAT represents Irish business said that plans by the US to slash corporate rates to 15% could pose a “competitive challenge to Ireland”.
Ibec said that the announcement was just one in “a long line of challenges that Ireland’s economic model has faced in recent years”.
“We have come through previous challenges stronger than ever and we must use every opportunity to champion internationally the depth, diversity and development of the Irish business model,” said Ibec’s director of policy and public affairs, Fergal O’Brien.
O’Brien said there would be a “plenty of obstacles to overcome” for the proposed US tax rate cut to come into force.
He said that plans that were previously mentioned around the mooted Border Adjustment Tax (BAT) would have been the most worrying aspect of any potential US tax reform plan for Ireland.
But it “now looks likely that this proposal will not proceed”.
The Trump administration earlier pledged to slash corporate rates to 15% as it prepared to unveil a long-awaited reform it touts as the “biggest tax cut” in US history.
But the plan could face stiff opposition in Congress, including from some Republicans, with lawmakers sharply divided over the prospect of fueling already-rising deficits.
“This is going to be the biggest tax cut and the largest tax reform in the history of our country,” Treasury Secretary Steven Mnuchin said at a discussion about the proposal.
Ireland’s corporate tax rate is 12.5% on trading income and 25% on non-trading income (eg rental income or investment income).
Slashing taxes on income and business was a key part of Donald Trump’s election platform, and the Republican billionaire is seeking to deliver on that pledge as his presidency nears the symbolic 100-day mark this weekend.
Mnuchin will outline details of the plan at the White House later Wednesday, but confirmed press reports that “the business tax is going to be 15%.”
He said the administration hopes to push the reform through the Republican-controlled Congress as quickly as possible, but declined to set a deadline.
Trump had initially hoped to drive through tax reform before the summer, but that ambition evaporated amid a failed push to repeal Barack Obama’s signature health care law.
“We’re working hard to get it done quickly,” Mnuchin said. “This is part of his big impact for the first 100 days.”
“We have fundamental agreement on what we’re trying to do and the details of tax reform are still to be worked out.”
The tax plan’s impact on the deficit and debt will be key to winning backing on Capitol Hill.
House Speaker Paul Ryan hailed the reform, even though Mnuchin signalled it would not include a tax on imports, something Ryan had lobbied for among fellow Republicans.
The party had been drafting plans for the so-called border adjustment tax for months.
Nevertheless Ryan praised the new plan as “progress.”
“It’s basically along exactly the same lines that we want to go,” he told reporters.
‘Explode the deficit’
The overhaul is likely to face stiff opposition from Democrats.
“I can tell you this: If the president’s plan is to give a massive tax break to the very wealthy in this country, a plan that will mostly benefit people and businesses like President Trump’s, that won’t pass muster with we Democrats,” Minority Leader Chuck Schumer said on the Senate floor.
He also warned that a plan that dramatically shrinks tax revenues would “explode the deficit.”
Analysts have said cutting the top marginal corporate tax rate by 20 percentage points could add a whopping $2 trillion or more to the deficit over a decade.
The administration has said its tax cuts will spur growth — its goal is 3%– thus bringing in tax revenues to make up the difference, a calculation known as “dynamic scoring” which the Trump administration supports.
“The difference between 1.6% , 1.8% GDP and 3% is staggering,” Mnuchin said. “It’s trillions of dollars of revenues. It’s tons of jobs.”
Economists say this growth effect is not supported by evidence from prior tax cut efforts.
Wishful thinking?
Douglas Holtz-Eakin, an economist and former head of the non-partisan Congressional Budget Office who served in previous Republican administrations, said dynamic scoring is wishful thinking.
“There has never been any single credible analysis of dynamic scoring that suggests that taxes pay for themselves,” Holtz-Eakin told AFP.
The tax cuts could be limited to a 10-year period, but Mnuchin said that would be less than ideal.
“If we have them for 10 years, that is better than nothing,” he said. “But we’d like to have permanency to it.”
Mnuchin said the lower corporate rate is aimed at helping small businesses, not the wealthy.
“What this is not going to be is a loophole to let rich people who should be paying higher rates pay 15%,” he said at today’s event, hosted by The Hill newspaper.
Mnuchin also said the administration plans to simplify the highly complex process by which Americans declare their income and pay taxes.
“For most Americans, we think they should be able to do their taxes on a large postcard.”
With reporting from Cormac Fitzgerald
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Thats 15% more than he pays in tax
@Austin Rock:
“Leaked returns show Donald Trump paid $38 million in tax in 2005″
http://www.thejournal.ie/trump-tax-2-3288156-Mar2017/
38 Million in one year, stop the madness.
@Austin Rock: Next week, ‘Trump Plans To Build Bridge From White House to the Moon, With Funding From Ethiopian Government’.
@Big Lee: Yeah, Steve bannon leaked one year coz it’s the one time he’s paid his taxes
@Grainne Abdulaziz: Ethiopia Have Loads Of Money ,They Were The First Country To Order The New Airbus A380 When Fools Pay Like Our Government Gives Them Foreign Aid…Ha Ha Ha
@Ben Moylan: any source for that? I looked it up and from what i can see the first Airbus A380 was bought by Singapore Airlines.
They were the launch customer for the Boeing 787 dreamliner not the A380
Before the usuals jump in claiming that this (even if it could feasibly happen) is awful for Ireland, all members of the Fortune 500 that employ people in Ireland responded to a survey the Economist did, a year and a half ago which asked why the settled where they did.. 1) was EU single market access, 2) was Irelands clear and easily understood regulatory regime, and then 3) was the 12.5% tax rate
It’s why, despite the fact that their sweetheart deal ended in 2014, Apple haven’t gone anywhere. Our tax rates are vital for our national economic strategy, but other countries cannot merely slash their corporation tax and hope to become the next Ireland. It’s so much more complicated than that.
@Chucky Arlaw: you’d need to call Trump and tell him
@Chucky Arlaw: Exactly, the US deficit is huge and infrastructure across many parts of the US is in desperate need of upgrading and repair. Lowering the tax will not necessarily bring companies back, but it will reduce the tax income.
@Lord Clanricarde: infrastructure is vastly superior in the US compared to this country. Multi nationals are under pressure to pay their fare share of tax. It’s just the stick and carrot approach by the Trump administration. If this goes thru it will affect us badly.
@prop joe: it most certainly is not, the infrastructure in the US is literally falling apart. The country is a train wreck after both Regan and bush slashed taxes and raised expenditure.
Even more importantly, how would trump make American companies pay tax, in America, on profits made in the EU?
He won’t, no matter what happens in the US, companies will still stay in Ireland
@Stephen Devlin: I know, it’s almost like Trump proposes simplistic solutions to complicated problems? Who knew taxation could be so complicated
@prop joe: Eh,no It’s not! I know,I live in the US,and everywhere you look,the infrastructure is falling down around our ears.
@Chucky Arlaw: so are you going to tell me Ireland has better roads, better airports, than the US? What infrastructure do we have which is better then the US? Dublin has poor public transport and a terrible road network. We don’t even have a housing supply for our workers.
@Seamus Mc Meel: Sears Tower is falling down???
@Seamus Mc Meel: really? What city in the US are you living in? I have to say nearly every time I go to the states it’s easy to get around. Find addresses thanks to the grind layout of the cities. Houses and offices are bigger. Yeah there are problems but compared to us it’s like comparing a Ferrari to a Lada.
@Chucky Arlaw: why would US companies pay taxes hear from the EU when they could send them back to headquarters in the US and pay the same rate? We are completely dependent on these companies and have no plan B.
@prop joe: Er, because the USA and the EU have no trade agreements, and so to send capital back to the US from the EU it would have to go through WTO tarrifs, which is circa 10%.. So unless the USA is dropping their tax rate to 2.5%, they won’t be able to offer an equal tax rate to the Irish rate..
But there are other reasons too, all a company, selling in the EU, has to do is match Irish regulatory standards. Then, they’re set up across the whole EU. Selling from the USA as you say would create all manner of administrative and regulatory headaches.
@Chucky Arlaw: So Cameron Longford (38 years) just fired 200 people and moved operations to a new 100mln facility in Romania avg salary 500/mth funded by Eu infrastructural fund even they had in Longford healthy profits amd tax breaks. Don’t kid yourself new generation East Eu learn English not Russian.
@prop joe: right prop joe
@prop joe: Ireland has no public transport apart from in the cities
@Chucky Arlaw:
Regarding your paragraph 2: simple! Trump hits untaxed accumulated profits of MNC generated by subsidiaries based in tax havens, holding the Group’s IP, who charge the likes of Irish Subsidiary a royalty for annual usage of that IP.
Calculation of said royalty charge is completely arbitrary and generally is struck at a figure to hoover 95% + of the Irish profits away from clutches of our Revenue Commissioners.
Trump will probably propose intro of a once-off 10% CT charge to enable repatriation of vast sums resting in those tax havens.
@Chucky Arlaw: As far as point two is concerned it’s easily understood there isn’t any.
You can just smell the desperation at this point……no wall, no end to Obamacare, no ban on migrants……..
@Tony Gordon:
BREAKING: “House Freedom Caucus announces it will support amended Obamacare replacement plan”
So long Obamacare!!
@Tony Gordon: I’m no fan of Trump but the guy has been president for only 3 months.
@Big Lee: It may get past the House now, but that shouldn’t even have been an obstacle in the first place.
It still can’t pass the Senate because Red Senators in Blue states would get crucified and there are quite a few. It’s a whole different game when you can’t gerrymander your district. Additionally, Rand Paul 100% still isn’t voting for that so you are starting with 2 vote majority in the Senate (51-49) and ~10 Red Senators on record as not liking the slightly better (from their perspective) previous (non-)plan.
Still an ill-thought out approach, still doomed to failure.
@Big Lee: *amended
@Martin Flood: And has not managed to fulfil one of his election claims. A clown and nothing else and dangerous to the world as well.
@John Considine: Rand Paul is part of the Freedom Caucus that just endorsed the changes made to AHCA.
@Big Lee: They are saying that people with pre-existing conditions will now have to fork out an extra 35%, which could raise their premium costs to over $100,000 a year ..And the likes of you are celebrating this,why?
@Tony Gordon: stock market record highs, and 17 year low in unemployment. Not all bad
@Plus Prom: Thanks Obama!
@Clon Lad: “They are saying”…..”They” are probably fake news.
@Big Lee:Don’t do ‘fake’ news ,man.I just leave that codology to your side.
https://thinkprogress.org/trump-care-more-cruel-d887344ff3d
You would be totally deluded if you don’t believe that insurance companies are not going to raise premiums..
@Martin Flood: Martin, FDR created the new deal and built the largest middle class in history in three months. Trump has done literally nothing in the same time period.
@Seán J. Troy: Interesting you choose a president from 70 years ago. What did the all others achieve in their first 100 days?
Mr Trump will be coining it in ‘even more’ if his Trumpcare & his Tax cuts become a reality…KA-CHING BABY!!
That’s about as likely to happen as his wall getting built!
This won’t happen, it’ll create a MASSIVE black hole in their budgets due to the loss of tax.
Or the individual states will all bring in their own duel corporate tax rates like with state income tax to bridge the gap. Big multinationals won’t be rushing around until a sweetheart deal for accumulated offshore profits is settled.
@Barry Somers: time for ireland to join U.S. or U.K. or stay in Eu. Confused.com
How many US Corporations pay as high as high as that.
@Tony Daly: Very few as they refuse to repatriate money from their DFIs (Direct Foreign Investments) and use shell-structures to shield as much of their domestic profits as legally possible. Typical net-tax paid for domestic business is in the range of 15-25% already.
I’m unsure what the net effect of dropping the taxable rate to 15% with no proposed drops to credits, allowances and write-offs but I can’t imagine any company would be wind up paying north of 10% in this scenario. I really can’t see how any amount of economic growth will be able to fund that shortfall.
The plan is essentially, employ more people so we can tax them instead, but it doesn’t in any way really encourage companies to spend their new earned wealth in this way; corporate strategy will decide that as it always has. So unless there is also a better reason to employ American, why would companies do that?
@Tony Daly: None
@John Considine: 0% offered to re-patriate overseas profits by Trump
Ireland is going to have to do a lot more to attract foreign direct investment into Ireland now! Including building much better economic infrastructure, such as having much more efficient and wide-reaching public transport in our cities (in Dublin, that would mean building the Metro underground railway system and completely re-structuring Irish Rail and Dublin Bus in order to make them more efficient and more frequent) and making our urban roads wider, and less burdened by superfluous traffic-lights, in order to make private car transportation flow much more smoothly and more quickly in our cities.
We are also going to have to dramatically reduce personal income tax rates, in order to make it easier for more Irish citizens to build businesses (to actually create a pro-enterprise and pro-home ownership economy) and to make it more attractive for foreign executives to live and work here.
@John Reid: soon will be a motorway from limerick to tuam. but, a dirt track from Cork to Limerick. Frickin disgrace FG.
@John Reid: you cannot reduce personal tax with low corporation tax.
@gregory: There is practically no Industry in that region between Limerick and Cork!!..Galway is one if the largest medical device hubs in Europe. It also has HP, EA and Apple on-route. Throw in the industry in Limerick, Shannon, Ennis and its pretty easy to see why that motorway and other infrastructure was built first!..Common sense!
@John Reid: It will be easier if Irish can understand they need of foreigners and their companies to have a good economic, but the reality is different, when Irish don’t want foreigners to live in Ireland, instead are blaming them for whatever happen. It’s important these foreigners company want to come, warm foreigners workers with the social situation they will live in. It’s like, we want foreigners company but we don’t want foreigners?
I’m just waiting for their spokesperson (guy from Holland) to let us all know what this exactly entails..But while I wait,this takes me back to the early noughties when the Repiglicans were in charge of the two houses and they gave bigly tax cuts to the rich..well,something bigly happened after that-and that was the worst recession in 70 + years..Yikes!
@Francis Mc Carthy: cringe.
@Andy Cahalan: Can’t help you with that ,lad.
@Francis Mc Carthy: you sound triggered, snowflake.
@Big Lee: You ok hun ?
@Francis Mc Carthy: Actually unemployment numbers dropped fast after Reagon tax cuts. That’s what he is emulating.
@gregory: Nope! Unemployment actually went up during the first year ..plus he also raised taxes too..So, I’ll give you two Pinocchio’s for that post of yours…Nice try though
Goodnight!
Trump -The knob.
Trickle-down Trumponomics.
He’ll have a hard time getting this one past fiscal conservatives in his own party (once again). They’ll be able to bypass the senate with a procedural move (hence the Wall being dropped as Infrastructure can’t be funded this way) so the fight here will be in congress. I await the result with interest, as it stands it shouldn’t pass, he doesn’t have the numbers ideologically *but* the lobby pressure from Industry will be extremely intense.
@John Considine: those fiscal conservatives buddies can award themselves with inflated ceo salaries .. they’ll fall in line. Great for american businesses- not so for Ireland inc- good by pharma companies.
@John Considine: “I call it trumped-up trickle-down, because that’s exactly what it would be.” – Hillary Clinton (2016 Election loser).
@Old Gabby Johnson: correct Gabby. This is an Xmas present beyond relief for U.S. MNC’s that we rely on.
@Old Gabby Johnson; Gregory: It is certainly inevitable that significant financial resources will be brought to bear, or possibly have already been brought to bear, on this proposal.
It’s free money and under the US system it would be negligent (legally) for public traded companies not to invest significant sums to make this happen. In fact, not doing so could potentially leave them open to shareholder action.
My point is rather that there is zero requirement, or even incentive, for companies to spend this money on employing people in America. What’s to stop them from using the cash, investing in long term FDIs while the weather is sunny, knowing this provides them with continued growth potential into the future? This has been their strategy for some time now as regards “windfall” money, why should it change now? And if it doesn’t change, why is it bad for Ireland? In summation, this will be good for the stock-price of American companies but there is no evidence whatsoever that it will provide jobs to benefit the average American and fill the gap in tax take.
@Steve Austin: has little or no impact to Ireland. American companies set up their European headquarters here, America is not in Europe.
If anything it will have a benefit to Ireland through increased exports to America.
@Dark Knight: These days U.S. companies look to low cost East Eu not Ireland.
Sure the effective rate of corporate tax in France is 8%. Still perhaps better safe than sorry never mind the children’s hospital and get busy building another runway for MOABS and Apaches and all manner of wingéd and non-winged armoured cars and tanks and guns to transit thru Shannon just in case.
Maybe build it all the way to DoonBeg so our newest foreign despo… Lord and Master can more readily be sheltered here, just in case?
Noonan can go full time down there as official Greeter with the red carpet and dancing leprechauns and his tongue out ready to polish the anointed One’s shoes.
@John O’Driscoll: completely agree but a proper bunker required for the Donald in Doonbeg or to throw them off better Lisdoonvarna sshh don’t tell.
I love Ireland and the Irish people more than most, believe me, but Trump isn’t the President of Ireland. We have to learn to look after ourselves!
He also pledged to build a wall at Mexico’s expense, abolish Obamacare, jail Hilary and ban Muslims. He’s talking shite again. Nothing to worry about.
@JJ O Riordan: but this one benefits his rich pals and republicans love money.
@JJ O Riordan: Don’t forget reopening the coal mines and building all those roads
@Dave Thomas: they do. But they’re smart enough to know that the USA isn’t part of the EU. Single market access and English speakers are just as much of a draw to the Googles Apples and Facebooks of the world.
@JJ O Riordan: but greed and stupidity often go hand in hand.
Corporation tax is one thing, but wages in the US, particularly in Pharma or Tech, are basically triple what we make here, those companies aren’t going anywhere soon.
Cut the irish corporate tax rate if necessary. Stay ahead while adrift in the Atlantic.
Where’s our €13 billion?
A wake up call for the IDA/Enterprise Ireland to start focussing on indigenous business’s who actually provide the bulk of employment in this country. All too often these entities have been all about headline grabbing foreign companies whom they’ve
lured in with sweet deals.
EU market is bigger than US. The Trump is just going to damage his own tax income. I don’t understand who the hell elected this looser to take away health care and make America great again.
A wake up call for the IDA/Enterprise Ireland to start focussing on indigenous business’s who actually provide the bulk of employment in this country. All too often these entities have been all about headline grabbing foreign companies whom they’ve
lured in with sweet deals
This is a race to the bottom.
@Pete Gilmartin: exactly. Why don’t we stop pretending. Let’s grant them 0% tax rate ( that way they can still claim rebates) and instead of politicians we can elect CEOs to run the country…. oh… wait…
have your say