US House of Representatives Republicans unveiled long-delayed legislation to deliver deep tax cuts that President Donald Trump has vowed, and potentially targeting US multinationals with overseas bases in Ireland.
The bill, representing what would be the largest overhaul of the US tax system since the 1980s, called for slashing the corporate tax rate to 20% from 35%, cutting tax rates on individuals and families and ending certain tax breaks for companies and individuals.
The bill also claims that it will “modernise” taxes for America’s global businesses, making “it easier and far less costly for American businesses to bring home foreign earnings” and to prevent “American jobs, headquarters, and research from moving overseas by eliminating incentives that now reward companies for shifting jobs, profits, and manufacturing plants abroad”.
The bill would also impose a tax of as much as 12% on multinational firms’ accumulated offshore earnings. US firms have stockpiled as much as $3.1tn (€2.66tn) offshore, according to an estimate by Goldman Sachs. The bill would cap the maximum tax rate on small businesses and other non-corporate enterprises at 25%, down from the present maximum rate on “pass-through” income of 39.6%.
It would create a new 10% tax on US companies’ high-profit foreign subsidiaries, calculated on a global basis, in a move to prevent firms from moving profits overseas. Foreign businesses operating in the US would face a tax of up to 20% on payments they make overseas from their US operations.
Analysts in Ireland have long said the US corporate tax cuts could in time affect the volume of investments injected by US pharmaceutical firms, in particular, into Ireland.
The incentive for US multinational to repatriate profits should have little to no effect on Irish corporate tax revenues, according to economists.
The Congressional passage was far from certain, and some business groups quickly came out against it. The National Federation of Independent Business, the influential small business lobby, also came out against the bill.
Mr Trump called the bill an “important step” toward tax relief for Americans. He added in a statement: “We are just getting started, and there is much work left to do.” The bill presented by the tax-writing House Ways and Means Committee would consolidate the current number of tax brackets to four from seven: 12%, 25%, 35%, and 39.6%. An earlier Republican tax outline had called for cutting the top rate for the highest earners to 35%.
The National Association of Home Builders blasted the legislation, saying it would damage home prices.
Mr Trump has asked Congress to pass the tax overhaul by the US Thanksgiving holiday on November 23, an ambitious goal for such a long, multi-faceted piece of legislation. “This is a very important and special moment for our country, for all Americans,” Republican House speaker Paul Ryan said.
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