For decades, the State’s low corporate tax rate, fixed at 12.5 per cent, has been a cornerstone of its strategy to attract US foreign direct investment (FDI). However, that long-standing advantage is now under pressure from global tax reforms, US withdrawal from international tax accords and the spectre of new tariffs.
While the global minimum tax rate, known as Pillar Two of the OECD’s Base Erosion and Profit Shifting (BEPS) framework, was designed to curb tax competition, uneven implementation and shifting US policy now threaten to erode the predictability Ireland once offered.
“Tax has been one of a number of important factors in attracting US FDI,” says Louise Kelly, partner at Deloitte. “But stability of that regime was even more important. Companies strive for certainty when making investment decisions.”
Orla Gavin, head of tax at KPMG, echoes this view. “It’s the 12.5 per cent rate for over 20 years that has served Ireland well,” she says. “That certainty must continue, but it may not be sufficient on its own going forward.”
Indeed, executives are increasingly looking beyond tax. Factors such as talent, regulatory reliability and access to the EU single market now play a larger role in FDI decisions.
The global minimum tax is already introducing complications. While it aims for consistency, implementation has varied across jurisdictions.
“The full impact is difficult to predict, particularly if there is fragmented implementation,” says Gavin. “Provided Pillar Two is implemented consistently and globally, Ireland should not be disproportionately impacted. But an EU-centric roll-out is not in Europe’s interests.”
Kelly echoes this. “Implementation across the globe has not been consistent, which creates additional complexity,” she says. “US policy is clear on supporting investment at home, which may give rise to an unlevel playing field going forward.”
AIB’s head of FDI, Mick Murray, highlights investor reaction: “A recent example was the removal of the uncertainty of ‘at least’ from the OECD agreement. That gave confidence to investors, showing Ireland’s long-term commitment to FDI.”
Complicating matters further is the US decision in February to step back from its commitment to Pillar Two. While the practical consequences remain unclear, the symbolic shift matters.
“It has created uncertainty in the international tax landscape,” says KPMG tax partner Cillein Barry. “It will be crucial that Ireland’s interests are appropriately represented in the EU’s response to US concerns.”
Murray agrees it is too early to quantify the impact but warns: “It does bring a period of uncertainty. There are certainly implications for the OECD agreement, but we’ll have to see what emerges as an alternative.”
This climate of ambiguity is problematic for long-term investment decisions. As Kelly puts it, “Current uncertainty is not helpful when companies are making investment decisions.”
New trade barriers also threaten Ireland’s appeal. The potential for US tariffs on European goods, particularly in sectors such as pharma and tech, could reshape cost-benefit analyses for multinational firms.
“Tariffs may result in additional costs for US multinationals investing in Ireland,” says Kelly. “We’re currently supporting companies on how to mitigate that impact.”
Gavin notes our vulnerability given our sector exposure. “Ireland is one of the US’s largest trading partners in pharmaceuticals, technology and agriculture. Any EU response to US tariffs could have significant implications for the Irish economy.”
Still, the Republic’s position within the EU and its unique status as an English-speaking gateway provide strategic advantages.
“We have a very strong relationship with the US,” says Murray. “We’re the gateway to Europe for many US companies, providing access to a market of approximately 500 million consumers.”
As tax policy alone becomes less decisive, attention is shifting to broader infrastructure and talent considerations.
“Investment in housing and energy, and availability of talent are now the most critical items for Ireland to remain competitive,” says Kelly.
Gavin concurs: “Budget 2026 must include measures that strengthen Ireland’s competitive edge. Infrastructure improvements are key.”
Track record also counts. “Ireland’s international FDI reputation has been established over decades,” says Murray. “Talent and consistency are the key reasons why companies are attracted to Ireland.”
So, are US multinationals rethinking their Irish operations in light of these headwinds?
“There is a great deal of uncertainty,” says Barry. “It’s difficult for any business to implement strategic changes yet. But Ireland must remain nimble and provide a stable environment.”
Murray anticipates only short-term caution. “We may see a slowing of decision making but this should be temporary. US companies still want access to the EU, and Ireland remains the ideal location.”
Despite the pressure, the State retains levers to maintain its competitive edge. Kelly emphasises tax credits: “Refundable tax credits, particularly for R&D, digitalisation and sustainability, can be quite impactful. These would improve Ireland’s attractiveness for innovation-driven investment.”
Barry agrees that incentives for emerging sectors are vital. “Ireland should broaden incentives to attract investment in AI and the green economy. Simplifying the tax code and reducing administrative burdens will also help.”
Finally, IDA Ireland remains central to the Republic’s pitch. “IDA Ireland’s new five-year strategy has the potential to deliver positive economic impact,” says Murray.
The ground is shifting beneath the State’s foreign direct investment model. The interplay of global tax reforms, US policy divergence and trade uncertainty presents real challenges. But our blend of long-term policy consistency, skilled workforce, and access to the EU still resonates.
As Barry notes, with the right policy response, “there is no reason that Ireland should not continue to be the destination of choice for FDI”.
