Experts dispute claim ‘flood of companies’ will exit Ireland

Senior Irish advisers and economists have disputed claims by a senior adviser to US president-elect Donald Trump that "a flood of companies" will leave Ireland and return to the US due to proposed changes to US corporation tax.

However, they say the moves could threaten attempts to attract new foreign direct investment, and could lead to fewer firms coming here in future.

Stephen Moore, a senior economic adviser to Mr Trump, said the centrepiece plan of the new Washington administration was wooing back multinationals involving a cut in the headline corporation tax rate from 35 per cent to 15 per cent.

“If you do that you are going to see a flood of companies leaving Ireland and Canada and Germany and France, and they are going to come back to the United States,” he said. “It is going to have a very high impact on jobs.”

Tax incentive

Senior accountants here agree that the changes would significantly limit the tax incentive for US firms to invest overseas in future. Obtaining a lower tax bill on profits made outside the US has been a key factor driving investment overseas in years, with Ireland one of the key beneficiaries.

Feargal O’Rourke, managing partner in PricewaterhouseCoopers, said that the Trump move was clearly intended to provide an incentive for US companies to keep their activities at home. It could also encourage some companies who engaged in tax inversions - takeovers of smaller foreign companies and a relocation of their tax residency - to return operations to the US.

Looking at the wider base of multinational here he said: “I don’t see US companies based here upping sticks and heading home. Such companies are well embedded and many US companies need a regional presence in the likes of a Dublin or a Singapore. And there are many other considerations other than tax when companies are looking whether to and where to expand.”

However, he said that if the tax changes are implemented, this could see US firms being “in less of an immediate hurry to relocate activities abroad that they can now carry on at home.”

“Certainly the tax disadvantages of keeping operations in the US would disappear and advantages suddenly would appear.”

Future flow

Economist Frances Ruane, former director of the ESRI, agreed that the tax changes could affect the future flow of FDI into Ireland.

“ I don’t see a lot of existing companies relocating back to the US,” she said, but acknowledged that the tax moves could slow future investment from US companies here.

Pádraig Cronin, partner in Deloitte, said that "the concern is that large reductions in the US corporate tax rate and the repeal of deferral would reduce the incentive for companies to locate activities outside the US, including in Ireland. In particular, business functions that do not need to be close to a key market location will now be more likely carried out in the US than elsewhere."

As the focus in future will be less on tax, Ireland needs to focus on improving other key factors to attract FDI, including our infrastructure and skilled workforce, according to Mr Cronin. He also said there could be opportunities for Ireland in attracting activity from other European countries where the tax rate is currently above the new proposed US level of 15 per cent.

Mr Moore, formerly a chief economist with US conservative think-tank the Heritage Foundation, said the effort to entice companies back from low corporate tax-rate countries would be central to boosting the US economy.

This was the “single most important thing for our country right now”, he told BBC Radio 4’s World At One.

‘No question’

“There is no question about it, and we see day after day in this country that we are losing our businesses and our corporations,” he said.

“They are effectively renouncing their US citizenship and they are moving to Canada, to Britain, to Ireland, to China and Mexico.

“That is a significant loss of jobs and we want to have the jobs here in the United States, we don’t want to have them go abroad.”

Mr Moore’s comments about companies “renouncing their citizenship” suggests that he is particularly targeting tax inversions.

A number of these deals have involved US firms merging with smaller companies based in Ireland. However the IDA has not marketed Ireland as a location for such deals as the economic benefits to Ireland are limited. The key focus will be on the main body of US companies with Irish subsidiaries but with remaining headquarters in the US.