McCain regime could pull €2.5bn from Ireland

A JOHN McCAIN presidency would herald a new tax regime enticing American companies to redirect the €2.5 billion they pump into the Irish economy.

This is according Grover Norquist, a tax advisor to the Republican Party and architect of President George W Bush’s tax cuts in 2000.

He said America had to compete with low-corporate tax economies like Ireland and would suffer if it continued to demand 35% of profits generated by businesses.

Mr Norquist said Senator McCain’s policy would lower his country’s corporate tax rate by 10% and begin a concerted effort to reduce the cost of doing business in America.

“If I had my way we would have the 12.5% rate you have in Ireland, but that is not likely to happen in the short-term.

“I think John McCain’s proposals are quite good for the American economy at the moment. Because they are the easier to get past a Democratic-led congress than more radical cuts I think would be good in an ideal world.

“Eventually we are going to have to compete with countries offering low corporate tax.”

Mr Norquist wrote the book Leave Us Alone — Getting the Government’s Money, Our Guns, Our Lives, and has advised Republican campaigns since 1988.

His comments broadly reflect the views of the US Treasury Department in a presentation it made on international tax reform to the US Senate’s finance committee in June.

The treasury criticised policymakers for not reacting to low tax regimes in Ireland, Iceland, Korea and Hungary and allowing the American economy to become a prohibitive environment to invest in.

“The US business tax system must help US companies and workers compete globally by taking into account the increasingly integrated global economy.

“The current US system is far from optimal, and we cannot afford to be left behind as other nations modernise their business tax systems, including the taxation of foreign earnings,” the presentation said.

Last year US companies’ activity in the economy were responsible directly and indirectly for an estimated 40% of the Irish Government’s tax revenue.

And according to the American Chamber of Commerce Ireland, €2.5bn was pumped into the exchequer by way of corporation tax paid by these 580 companies.

For his part, McCain wants to increase the competitiveness of the American economy by lowering the corporate tax rate from 35% to 25%.

His manifesto said existing policy had failed to keep pace with international trends.

“A lower corporate tax rate is essential to US competitiveness. America was once a low-tax business environment, but as our trade partners lowered their rates, America failed to keep pace, leaving us with the second highest rate among the world’s advanced economies,” his manifesto said.

In contrast, Democratic candidate Barack Obama has promised to retain the 35% corporate tax rate and instead provide relief for small business.

McCain said this would not encourage companies to channel their profits through the American treasury.

Mr Norquist said in previous elections the issue of corporation tax did not resonate with voters and received little news coverage.

However, he said if the Republican Party can get its message across, he believes it will be the first presidential election to be decided on business costs.

“In 1980, 20% of Americans had shares, today that figure is 60% of adults and three-quarters of voters. The tax on business affects the value of their savings.

“I have a friend in Michigan who says the plans of Barack Obama would reduce the value of his company by 15% and this affects a lot of people,” he said.

Mr Norquist said McCain would win November’s election if his campaign could convince voters a Democratic government would be detrimental to their retirement plans.

He predicted the Republicans would invest in adverts to focus on potential legislative reforms for employer sponsored pension plans (401ks).

“If we can get just two million people to understand this distinction we will win. In 50 years time this could be known as the 401k election,” he said.