Ireland Awaits Results Of US Tax Reform

By Global Tax Weekly

Tax reform is expected to not only have a transformative effect on the US itself, but also internationally, as US and foreign investors shift more investment to America. And Ireland is one country worried about the impact of the proposed corporate tax cuts and foreign dividend exemption in the US.

Brexit is often identified as the greatest danger to the Irish economy, given its strong commercial links to the United Kingdom. But, with Ireland’s trade and investment links to the United States arguably even more significant, the economic fall-out could be more serious than a hard Brexit.

Statistics attest to how Ireland’s economic fortunes are intertwined with those of US investors. US investment in Ireland totals USD343bn, and while Ireland represents just 1 percent of the European economy, it attracted 20 percent of all US FDI investment to Europe in 2015. Some 150,000 people are now employed by American firms in Ireland – around 7 percent of the workforce. So it almost goes without saying that if substantial numbers of US investors began pulling out of Ireland, this could be disruptive for the economy.

But perhaps the risks are being overblown. The United States may become more competitive relative to Ireland if its tax reforms go through. But this won’t necessarily diminish Ireland’s competitiveness. Its low corporate tax is unlikely to change any time soon, its membership of the EU makes it a convenient entry point into the EU markets, and there are a range of other factors beyond these two key advantages that attract foreign investors from the US. Fergal O’Brien, Director of Policy and Public Affairs at Ibec, put it well recently when he said that US firms “will still find Ireland a compelling investment location.”

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