US Congress, not us, blocking tax reform

In the course of a strong attack on American businesses suspected of moving off shore to avoid taxes, US president Barrack Obama specifically mentioned Ireland as one of the havens during a television interview on the business network CNBC on Thursday.

He was specifically targeting what the Americans call ‘tax inversion’, which allows an American company to merge with an offshore company and then benefit from the tax regime in the foreign country.

In recent years, Ireland has been identified as one of the more popular destinations for American companies in search of foreign acquisitions, because the Irish corporation tax rate of 12.5% is almost one third of the rate in the US.

Mr Obama has been engaged in a campaign-style visit to California, where he has come under criticism for his failure to introduce meaningful corporate tax reform during his almost six years in office. This could be a hot issue in the forthcoming mid-term elections in November.

Earlier in the week, M Obama told students at a California college that the US Congress has been responsible for delaying reform.

The White House has supported the efforts of Democrats in Congress to curb inversions, but Republican opponents have blocked this in the hope of getting wider reform of the overall tax system. Republicans insist that the American corporation tax rate should be more competitive.

While Mr Obama seems to be pointing an accusing finger at this country, it seems the Republicans are suggesting that the US should follow our example on corporation tax.