Another key date to note in an already busy calendar
Commercial life is driven by timelines and deadlines.A bigger part of the Brexit problem, at present, is the lack of clarity on when the UK will actually leave the EU, rather than what shape the future relationship might take, writes .
There has been considerable speculation in recent days with regard to the UK’s future intentions in participating in a Customs Union, fuelled in part by a vote in the House of Lords to remain in the Customs Union, and by conflicting news reports last weekend as to the preferences and intentions of the UK prime minister Theresa May.
This uncertainty has an impact on the so-called transition agreement between the UK and the EU.
If the transition agreement is adopted in its current form in full, Brexit — for most practical commercial purposes — will not happen until the end of December 2020.
However, the EU chief Brexit negotiator Michel Barnier, who is visiting Ireland, keeps reminding us that nothing is agreed until everything is agreed. It is still prudent for business purposes to plan for Brexit on March 29, 2019.
Against such a backdrop, I’m hesitant to identify another critical date. Nevertheless, because of the importance of US investment to the Irish economy, there is another critical date looming — June 22, 2019.
The US Tax Cuts and Jobs Act was passed into law on December 22, 2017, and it heralded the most significant tax reform in the US since 1986.
From an Irish perspective, two key elements were the reduction in the US corporation tax rate from 35% to 21%, and the elimination of a US tax deferral on profits earned in Europe.
The new rules are in effect for the financial year 2018 and beyond.
Yet, because of the way US tax law is constructed, there is still quite a bit of uncertainty as to exactly how all of the new provisions will work. For instance, it is not yet clear how the new rules will interact with taxes paid by US subsidiaries in other countries such as our own.
These gaps will be filled by new tax regulations which are separate to the law as passed.
This process is quite different to the process we are accustomed to in Ireland, where the precise language of taxing the business and the citizen is put into the Finance Act. Very limited scope is given to the Revenue Commissioners to set the rules for collecting taxes.
There are, of course, exceptions — the entire PAYE system is largely operated through regulations made by Revenue, as distinct from legislation passed by the Oireachtas.
However, such examples in Ireland are relatively few and far between, whereas
almost the opposite is the case in the US.
Much of the nitty-gritty of the US tax rules are set by the US civil service, which makes regulations to bolster the framework of the tax laws passed by Congress. This is where the new deadline comes in.
I understand that many of the new regulations won’t be available until the early autumn.
Furthermore, it appears that if any new regulations are to take full effect from the date of the passing of the Tax Cuts and Jobs Act, those regulations must be drafted and published by June 22, 2019.
Our open economy is very exposed both to the UK and to the US. Last year, the value of Irish goods exports to the US was some $50bn. Despite our small size we are one of the top 15 trading countries for goods with the US.
Both Brexit and the US Tax Cuts and Jobs Act involved decisions totally outside our control.
Our best response to the uncertainty created by these decisions is not to depart from our own key policies of EU membership and a low corporation tax rate and the employment it attracts.
It’s bad enough having uncertainty on one side of a partnership.
Uncertainty on both sides leads to chaos.
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