US tax cut targeting Irish-based firms could emerge in first 100 days

A senior economic adviser to Donald Trump has conceded Ireland will retain its corporate tax advantage over the US even if Congress passes cuts outlined by the president-elect.

The new US policy aimed at repatriating multinationals could be in place within the first 100 days of the Trump administration, according Stephen Moore.

However, in an interview on Friday he said the US was more concerned about companies leaving for countries such as China and Mexico and the knock-on effect this has on domestic manufacturing jobs.

Speaking on Newstalk, Mr Moore said while Mr Trump’s intention is to reduce the corporate rate to 15 per cent, this would have to go through Congress whose plan is for 20 per cent.

Ultimately, any agreed upon rate would likely fall somewhere between 15 and 20 per cent, he said. Ireland’s corporate tax rate is 12.5 per cent.

The tax cut could be passed within the first 100 to 150 days of Mr Trump’s administration.

Smaller advantage

"Ireland will still be lower than the United States, so you will still have a competitive advantage over the United States, but the advantage will be much lower than it is currently," Mr Moore said.

“If we make this change, instead of being significantly higher, you would be slightly higher. I think mostly the effect of our business tax reduction will be to keep companies home.”

The incoming administration views the policy move as a much-needed economic stimulus and is aimed at delivering on Mr Trump’s promises of bringing jobs back to the US, particular in neglected areas such as the so-called Rust Belt.

“This is going to be one of [Mr Trump’s] highest priorities. It’s very difficult to get laws passed in America but this is a new administration, he has a mandate to do this from the voters,” Mr Moore said.

“And obviously as the Bill goes through Congress there will be compromises but in the end I would put fairly high odds that we are going to get a corporate tax cut.”

He said Ireland has a good, well-educated labour force and is certainly a “very desirable place” for businesses to base themselves.

“Our concern isn’t so much companies leaving for Ireland as leaving for China and Japan and Mexico and countries like that,” he said.

Foreign investment

Concerns over the potential impact of the move on Ireland’s vital foreign direct investment (FDI) have been played down, with commentators saying it would be unlikely to prise away those companies already established here.

The concerns are more focused on the potential impact on future FDI, although, as Mr Moore conceded, Ireland is likely to retain a superior tax advantage.

On Friday, the director of the Economic and Social Research Institute, Prof Alan Barrett, played down the prospect of multinational firms leaving Ireland.

He told RTÉ's Morning Ireland programme that foreign companies have been "locked in".

“We all understand from recent experience that when politicians talk about slashing taxes on the one hand and raising spending dramatically on the other that something has to give,” he said.

Prof Barrett explained fiscal conservatism was no stranger to the Republican Party, which did not want to see the fiscal deficit ballooning. Therefore, it would be difficult to see Mr Trump getting tax cuts through Congress while implementing major spending plans, he said.