Joe Biden discusses his Irish ancestry
For years, Ireland was a haven for US firms due to the country’s 12.5 percent rate of corporate tax, introduced back in 2003. However, experts have warned the country should prepare for “receiving less revenue from corporate tax” following a “significant shift in the US position”.
Dermot O’Leary, the chief economist at Goodbody Stockbrokers in Dublin, said: “The genie is out of the bottle.
“We have seen a very significant shift in the US position.
“We need to prepare for receiving less revenue from corporate tax.
“That’s something we can plan for.
“The bigger issue is what it does to our industrial strategy.
“That requires a rethink about what we can offer multinationals that base themselves here.”
This marks the first time the Irish are thinking about a future where the tax rate will no longer be an immovable industrial policy.
A senior Irish official told Political: “We’ve been saying forever: We’ll never touch 12 point 5.
“But there’s little practical point in continuing to draw that line in the sand if the Organisation of Economic Cooperation and Development (OECD) tide is finally coming in.”
The OECD is an intergovernmental economic organisation with 37 member countries, founded in 1961 to stimulate economic progress and world trade.
Donald Trump rejected the OECD but his successor and his treasury chief, Janet Yellen, backed it.
It is believed Mr Biden and Ms Yellen want American multinationals to pay 21 percent of their profits overseas.
Irish Finance Minister Paschal Donohoe published fiscal plans last week and predicted Ireland will lose €2 billion in annual corporation tax collections by 2025.
He said: “Small countries, such as Ireland, need to be able to use tax policy as a legitimate lever to compensate for advantages of scale, resources and location enjoyed by larger countries.”
While Ireland quakes at the thought of receiving less revenue from US firms, other analysts said Ireland’s multinational clusters will keep growing.
Peter Vale, head of international tax at Grant Thornton in Dublin, said: “People aren’t going to leave Ireland for lots of good reasons.
“But the higher the taxation rate goes, the less attractive Ireland becomes.
“So it is in Ireland’s interest to keep that agreed minimum rate relatively low.”
He continued: “Let’s say it’s a 15 percent global rate.
“You’d be paying 12.5 percent here and 2.5 percent in the US.
“Ireland would still be the best place from a tax perspective in Europe.”