Government urged to restate low tax policy

The lobby group for US multinationals in the Republic has urged the Government to restate its commitment to the "lowest possible" rate of corporate tax in the face of moves to reduce taxes in many EU accession states.

Noting that the rise in Irish business costs and a large infrastructure deficit were a serious disadvantage in the battle for multinational investment, the American Chamber of Commerce Ireland said the Government must radically step up its efforts to encourage such investment.

"You cannot recreate the circumstances of the 1990s," said incoming chamber president Jim O'Hara, general manager of Intel Ireland. "The Government needs to restate its commitment to the lowest possible tax rate rather than suggesting 12.5 per cent is 'as good as it gets', particularly in light of the global trend towards lower levels of income tax, especially on corporate profits."

Mr O'Hara was speaking at a briefing to outline his priorities as president of the body that represents the interests of more than 400 groups with Irish operations.

The Republic faced a more serious challenge than ever to maintain its position as a preferred location for foreign direct investment, he said. The Government could not afford any complacency about tax competition when other countries offered similar if not better tax incentives.

In a submission to Government on the new National Development Plan, the chamber called for the introduction of a volume-based research and development tax-credit system. The chamber said the tax credit in question should be raised to 50 per cent and called for tax incentives to encourage the commercialisation of intellectual property.

Mr O'Hara praised the Government's pro-business stance and said there were reasons to be proud of the recent economic success. However, infrastructure and the research and development sector were "coming from behind" in the effort to increase business productivity.

"Areas of key concern include re-establishing our leadership in post-primary education, growing our research and development capability, preserving and expanding a pro-business tax environment that supports that national agenda, and rapidly upgrading our physical and digital infrastructure."

Citing the rise in business costs and a big increase in energy costs, he said the Government should do more to foster competition in the electricity sector and expand the availability of broadband.

In his capacity as head of Intel Ireland, Mr O'Hara said he had personally raised the increase in electricity costs at a meeting with Minister for Communications Noel Dempsey. "We've gone from being one of the least costly countries in Europe to one of the most costly," he said.

The Republic needed to secure only 5-10 per cent of global multinational investment to maintain its position, he said. For many years it won 6 per cent of global investment.