IDA plays down fears over US tax amnesty

THE IDA yesterday said it was not concerned a new US corporate tax amnesty would have a negative impact on multinational investment and jobs in Ireland.

The amnesty, signed into law by President George W Bush just before last week’s election, allows American companies to repatriate their foreign income at a new tax rate of 5.25%.

Prior to the change, which is included in the American Jobs Creation Act, US firms tended to keep foreign earnings abroad to avoid paying a hefty 35% tax on all profits sent home.

Although the new slashed 5% rate will inevitably result in additional investment in the US, the IDA is not concerned that Irish investments may suffer as a result.

An IDA spokesman last night said: “There are no concerns about investment or jobs in Ireland. We don’t feel it will have a major impact here.”

The IDA does acknowledge the amnesty will likely see investment sucked into the US from around the globe but does not believe the move will impact on ongoing investments here.

A spokesperson for Enterprise Minister Micheál Martin backed up that view, saying most US firms in Ireland had established their European headquarters here and would remain committed to Ireland.

“We don’t have huge concerns at all because a lot of the US jobs and presence here are their EU headquarters and they need a presence to do business here,” the spokesperson said.

Concerns over Irish jobs and investments is also limited by the fact that the US amnesty expires after 12 months. After that the old 35% rate of tax will again apply.

Indeed, some Democrats in the US opposed the new act saying it would result in more US jobs going overseas.

John Kerry, the failed Democratic candidate for president, had made it clear he opposed the loophole allowing US firms to avoid tax on all foreign earnings simply by keeping the money abroad.

Had he been elected he would likely have moved to force US multinationals to pay tax on all foreign earnings - a move which would have had a far more negative consequence for Ireland than the current short-term development.

The consequences to Ireland of such a move were highlighted by Taoiseach Bertie Ahern last week who said a John Kerry victory would have spelled disaster for the Irish economy.

However, the new US act does offer a once-off chance for US firms to repatriate some of the €270 billion they have accumulated in profits around the world.

And a significant proportion of that money has been generated and kept in Ireland by the numerous American IT and pharmaceutical giants which dominate the Irish economy.

It is understood that among the companies which lobbied for the tax break were numerous firms with significant operations in Ireland including Dell, Intel, Oracle, Hewlett Packard and Wyeth.

And, in a report expected this week, investment bank Morgan Stanley is expected to warn that US companies will reduce the amount they invest in Europe as they redirect money towards the US.