After Donald Trump, call for new focus on Irish firms
Alan McQuaid, chief economist at Merrion Capital, said more effort should be devoted to keeping and developing Irish companies that compete internationally because they are not subject to the threats of the US and the UK slashing corporate tax rates.
He said a lot of the “artificial” accounting involving the tax arrangements of multinationals had thrown Ireland into a bad light, presenting a distorted picture of Ireland in the US as unfairly holding hundreds of billions in investments.
Such perceptions will become important, if Mr Trump follows through with his pledges for tax amnesties and to cut US corporate taxes to 15% from the current US headline rate of 35%.
“The issue is that Ireland sticks out. There is an artificiality to the whole thing,” Mr McQuaid said.
The huge effect on Ireland from multinationals re-arranging their tax affairs was made clear in CSO figures published yesterday on foreign direct investment flows in Ireland.
The figures showed that the stock of foreign direct investment surged 60% to €815bn in 2015 from the previous year — mostly driven by “redomiciled” companies in Ireland, which add no jobs or operations based here.
Ireland could be thrust back into the headlines in the US and in the UK, which following Brexit, has increased reason to cut its corporate tax rates, the chief economist said.
Irish exporters struggling to cope with the weak sterling, however, got some relief in recent days following the victory of Mr Trump as sterling hit a five-week high against the dollar and recorded its best fortnight on a trade-weighted basis in almost eight years, with investors’ focus having turned away from Brexit and towards political risks elsewhere.
Since Mr Tump’s shock victory in the US presidential election on Tuesday, sterling has been the best performer of any major currency, outshining even the dollar, which itself is on track to record its best week in a year against a basket of currencies.
Sterling rose almost 1% to trade at 86.13p against the euro. Sterling was building on gains as investors turned their minds to a slew of upcoming political risks in Europe — such as an Italian constitutional referendum next month and French and German elections next year — as Mr Trump’s win spread fears about a global wave of populism.
“Sterling’s been the greatest outperformer since the Trump win. You’d have thought he won the UK presidency,” said Societe Generale currency strategist Alvin Tan.
Concerns that Italy could become the next nation to be hit by a global populist revolt, which could sink Matteo Renzi’s premiership in a referendum next month, drove its borrowing costs to their highest for over a year yesterday.
Mr Renzi has staked all on his attempts to win backing for constitutional reforms in the December 4 referendum.
Central Bank governor Philip Lane yesterday shrugged off a selloff in eurozone government bonds since Mr Trump’s win, playing down the significance of “day-by-day” market moves for ECB policy.
