After the shamrock, Taoiseach needs to talk turkey with Trump
St Patrick’s Day meeting with US president a chance for Kenny to set out Ireland Inc’s stall
Total US foreign direct investment into Ireland topped €292 billion as of 2014 and any plans by the Trump administration to slow investment overseas would be a concern for Ireland. Photograph: Niall Carson/PA Wire
While much focus will be on what Mr Kenny might say about Irish immigrants in light of the latest travel ban on six Muslim-majority countries coming into effect on Thursday, any economic message he delivers privately will be critical, given the tax plans that will soon land in Mr Trump’s in-tray.
The Taoiseach has already flagged that he intends to offer a strong defence of the benefits of being in the European Union against the pro-Brexit leanings of the US president.
The “phenomenal” tax plan Mr Trump promised in February to deliver in “two or three weeks” has not yet materialised. This delay may be a good thing for the Government as it affords the Taoiseach an opportunity to set out Ireland Inc’s stall in front of an audience of as many as nine Trump aides who could flank the US president during their meeting in the Oval Office.
Trump’s tax plan remains in the realm of crystal ball-gazing and Irish officials will be watching in the coming months to see if he makes good on his pledges to slash corporate taxes from 35 per cent to 15 per cent, penalise Americans firms that move overseas with an exit tax or border tax on their returning imports and a lower tax rate on profits being repatriated from abroad.
The promised corporate tax reform sits on a drawing-board and the clearest plan offered so far – drafted by Republicans in the House of Representatives – sets the corporate tax rate at 20 per cent with a plan to cover the cost of that through a tax on imports, which Mr Trump supports.
The prospect of a lower US corporate tax rate, though still higher than the Irish rate of 12.5 per cent, is not overly worrying many in Dublin where the prevailing view is that the lower Irish rate is one of the attractions, but not the main draw, for US multinationals looking to invest overseas.
Total US foreign direct investment into Ireland topped $310 billion (€292 billion) as of 2014 and any plans by the Trump administration to slow investment overseas would be a concern for Ireland where there are about 150,000 people employed by US multinationals. For the most part, Trump’s main target appears to be the jobs-heavy American manufacturing that has relocated to Mexico.
‘Marginal calls’“It may mean that there are some marginal calls which will be made in terms of where the investor goes to, but frankly we wouldn’t be overly concerned about it,” said Martin Shanahan, chief executive of IDA Ireland, the state agency responsible for attracting investment into the country.
“We would think that corporate tax reform is a good thing and that it certainly will be welcomed by US multinationals, and my expectation is many of our client companies are optimistic about it.”
Mr Shanahan says that a border adjustment tax is one area the IDA will be monitoring closely given its impact on the sale of financial and technological services from Ireland to the US.
“Where it may cause us difficulty in particular is where US multinationals are selling back into the US – either sub-supplying into their own companies as part of the input to the final product, or where they are supplying product back into the US from Ireland,” he said.
Stressing the importance of the role that the Irish subsidiaries of US multinationals play in Ireland – namely, that Irish-based US subsidiaries serve markets in Europe and beyond and are not brass-plate entities – is another key story that Mr Kenny will be keen to tell Mr Trump and his aides.
Bilateral trading relationsLikewise, the oft-peddled line about Irish companies employing almost as many people in the US as American companies in Ireland will point to the importance of continued bilateral trading relations to an administration pushing a staunchly economic nationalist and protectionist agenda.
“These companies are called multinationals for a reason: they trade globally and have to have operations globally,” said Mark Redmond, chief executive of American Chamber of Commerce Ireland, who is in the US this week.
The Taoiseach’s lobbying on immigration concerns could extend to the corporate world given how the Trump administration’s curbs on the issuing of “H-1B” working visas could slow the career trajectory of many Irish executives ascending the ranks of major American multinationals.
“Ireland has been particularly successful with all these individual leaders who have managed their way into US boardrooms and headquarters. That would hurt us if it were cut off.”
Plans to repatriate hoarded or future US multinational profits from overseas may only cause unease in Dublin were it to diminish an American firm’s capacity to invest abroad, but there is little fear of this within Irish corporate circles given the attractions of lucrative European markets.
“These are profits that are currently being held offshore so I can’t see how this makes a difference to the Irish economy if they are repatriated to the US or not,” said Minister of State for Financial Services Eoghan Murphy, who is charged with promoting Dublin as a financial centre.
“If we continue to work with the emerging OECD model for taxing income based on the location where it is generated, then there shouldn’t be a significant impact to our tax base from any Trump changes.”
Still, there will be much for the Taoiseach to pack into his Oval Office meeting.