US chamber calls for a guarantee on corporate tax

Ireland's 12.5 per cent corporation tax rate needs to be copper-fastened in legislation, according to the newly-elected president of the American Chamber of Commerce in Ireland.

Mr Austin McCabe says the move is necessary in the face of increased pressure from the EU for the harmonisation of tax rates. The American Chamber is calling for this "as it is possible that the Convention on the Future of the EU could recommend the ending of the unanimity rule for direct tax and other issues", he said in a statement issued to mark his election as president.

"Companies hate uncertainty," he said yesterday, and this was why it was necessary to make some move to guarantee the 12.5 per cent rate. The Government may have other ideas about how this could be done, he said, but legislation seemed an obvious route.

Looking at the overall situation for industry, Mr McCabe, who is managing director of Symantec, an internet security company in Galway, said: "Ireland needs to redefine its competitiveness."

The Republic was no longer a low-cost environment; the fall-off in science and computer graduates was a cause for concern; and physical infrastructure needed considerable investment, he said.

Industry, policymakers and Government agencies must work together to address these challenges, he said.

"We must re-evaluate how we market Ireland's attractiveness as a location for R&D, shared services, supply chain management or sales and marketing activities." These are the growth areas that will allow multinationals to undertake higher value activities here, thus securing their Irish investments. The chamber is currently working with IDA Ireland to develop an initiative in this area.

The chamber represents 570 US companies who have invested $34 billion in the Republic and employ more than 90,000 people.

Mr McCabe said Ireland faced increasing competition for US investment in the years ahead. But he added that US companies here were more focused on the business environment than on the political position of Ireland's stance on Iraq.

One of the key areas identified by the chamber was the need for increased investment in research and development, as spending here is still below that in other knowledge-based economies.

Mr McCabe said fiscal incentives were needed to swing companies towards investing in this area in Ireland. These could come through tax credits or increased grant aid for research and development to encourage the emergence of a "cluster" of research-based firms here.

The high level of operating costs was also an issue. "Non-labour costs across a range of sectors such as insurance, electricity and communications have been rising rapidly in the last number of years, with serious knock-on effects for competitiveness.

"Government and the industry regulators need to look at stimulating greater competition in these sectors," he said.

Among other issues the chamber wants to see addressed are the development of broadband infrastructure, the implementation of the recommendations of the Task Force on Physical Sciences to ensure a suitable flow of graduates in science-based subjects and the development of regional infrastructure as outlined in the National Development Plan.