Low corporate rate vital for tech jobs, says tax expert

The Republic could face further job losses in the technology industry as multinational companies continue to scale back operations in response to the global downturn, a leading US strategist with financial services firm Deloitte & Touche has said.

Speaking to The Irish Times yesterday, Mr Peter Corcoran, global head of international tax with Deloitte, said "there has been and will continue to be further retrenchments" in the technology industry.

But he claimed that, although the Republic will suffer, to some extent, from the cutbacks, it would not be the "first on the list" as multinationals established here tend to have a "long-term strategy".

His comments followed the launch of Deloitte's taxation guide to Ireland, which provides a comprehensive overview on the impact of the Irish tax environment on multinationals based in the Republic as well as those considering investment here.

Singling out the State's low corporation tax rate of 12.5 per cent as crucial to attracting and maintaining foreign direct investment (FDI), Mr Corcoran warned that any move by the EU to impose a pan-European corporation tax rate would "create a very challenging dynamic for Ireland". Although there are no signs of full tax harmonisation in the near future, other member-states have complained in the past that Ireland's low corporate tax rate gives it an unfair competitive advantage.

Mr Corcoran, who is based in New York, said one of the main concerns of US multinationals either located or considering investing in Ireland, was uncertainty over the corporate tax rate.

He said US companies "need comfort that the 12.5 tax rate will remain in place in the future".

He also warned that escalating infrastructure costs were gradually eroding the benefits to multi-nationals of low tax rates. "Maintaining a cost-effective infrastructure here is vital but, as Ireland prospered economically, it was inevitable that there would be some changes.

What is important now is to focus on keeping these rises in check. It's difficult but Ireland needs to retain its competitive edge."

Currently, US investment provides around 80,000 jobs in Ireland but Mr Corcoran said the days of large-scale job generation from multinationals was "probably gone" as FDI funds were redirected to the "low-cost manufacturing industries in the Far East".

He stressed that Ireland had to move up the "skill chain" and "capture the R&D market". The key to achieving this, he claimed, was the closer fostering of relationships between universities and the private sector.

But the flip side to developing a highly skilled economy, Mr Corcoran conceded, was the loss of large-scale manufacturing jobs.