US election focus on jobs could backfire on Ireland
The New York Times investigated three companies listed on the Republican website – ABB, Sun Power and Fisker Automotive – and found that the Romney campaign exaggerated or distorted the extent to which stimulus money went overseas.
It is nonetheless true that Fisker, which has received $193 million in federal loans, is assembling its Karma electric car in Finland. And Fisker’s investors include a firm with strong Democratic connections.
As Gerry Murphy, executive director North America for Enterprise Ireland notes: “When economies go down, protectionist measures always go up.”
Though they’re unlikely to see the light of day, changes to the US tax code could inhibit the US Foreign Direct Investment that is crucial to Ireland’s recovery.
At present, a US company operating in Ireland pays the Irish corporate tax rate of 12.5 per cent and is allowed to defer US corporate tax on profits reinvested abroad. Obama’s rhetoric implies that he would end the tax deferral, but he has not clearly stated that. In any case, the Republican-held House of Representatives would block any attempt to do so.
Most US companies prefer to defer tax rather than repatriate profits. Those who repatriate receive a credit for tax paid abroad, but must pay the difference between that and the current US corporate rate of 35 per cent.
Romney has made a vague promise to allow companies to repatriate profits with little or no taxation. George W Bush adopted such a policy on the grounds that it would create jobs in the US, but companies used funds to pay off debt or buy back shares instead.
Obama promised in February to reduce US corporate tax to 28 per cent. Romney says he would reduce it to 25 per cent.
In this election year, any economic activity outside the US is suddenly suspect. Romney is under pressure to explain his personal financial holdings in the Caribbean. John Conlon, executive vice-president North America of IDA Ireland, stresses that Ireland “is not a tax haven. We are a low tax jurisdiction.”
US companies “come to Ireland to operate their European business. They are there for business reasons as well as tax reasons. They are not brass plates like in the Cayman Islands.”
So far, Ireland has barely figured in US media reports about outsourcing. But should the country suddenly get caught in the crossfire of recriminations, Murphy has his ammunition ready.
A recent study by the Center for Transatlantic Relations at Johns Hopkins University found that Ireland and the US employ equal numbers of each other’s citizens: some 110,000 on both sides of the Atlantic.