Incoming US treasury secretary to cut corporate tax
Trump-selected Steven Mnuchin plans to cut corporate tax from 35 per cent to 15 per cent
Steven Mnuchin: “By cutting corporate taxes, we’re going to create huge economic growth and we’ll have huge personal income.” Photograph: Albin Lohr-Jones/Pool
A sharp cut in US corporation tax is to be a priority for the new Trump administration, underlining the huge challenges which Ireland will face in attracting inward investment in future. Steven Mnuchin, named by US president-elect Donald Trump as treasury secretary, said that the new administration’s “number one priority” would be tax reform, involving a sharp cut in personal and corporate taxes.
The corporate tax rate would be cut from 35 per cent to 15 per cent – as promised during the election campaign, Mr Mnuchin said,.
“By cutting corporate taxes, we’re going to create huge economic growth and we’ll have huge personal income,” he said in an interview with CNBC. “We’re going to get to 15 per cent and bring a lot of cash back into the US.”
The Trump tax programme will have to be negotiated with a Republic-dominated Congress. Feargal O’Rourke, managing partner with PwC said that the new administration might face a fight getting agreement to drive the corporation tax rate as low as 15 per cent. However, he said a big reduction was still in prospect, possibly to 18 or 20 per cent.
Mr Mnuchin is a Goldman Sachs banker-turned-Hollywood movie financier. He said he would oversee “the largest tax change since Reagan”, involving big cuts in personal as well as corporate tax, widely criticised as likely to benefit the rich.
The high rate of US corporate tax has long been a factor pushing US firms to invest overseas. By doing this, they have been able to avail of lower corporation tax rates. The US tax system also allows them to avoid paying US tax on earnings held overseas, provided they are not repatriated. Ireland and other countries seeking foreign direct investment have used this tax factor as an attraction to seek inward investment from the US.
Ireland would retain the tax advantage conferred by our 12.5 per cent rate, according to Mr O’Rourke. He said he did not expect companies already here to relocate operations back to the US. However, the cut would erode Ireland’s tax advantage to some extent. Multinationals would still invest overseas, he said, but in future the flow out of the US might be slower, as more operations were served from the US.
Brian Keegan, head of tax at Chartered Accountants Ireland, said that “in a post-Brexit, post-Trump world” access to markets would still be a key issue for companies looking for where to invest and this could turn out to be as important as low corporation tax. – (Additional reporting, Guardian service)