Hundreds of millions of dollars could flow out of Ireland to the US under a new Bill likely to be passed by the US Senate.
The Homeland Investment Act, which is strongly backed by Intel, Dell and other US technology companies with bases in Ireland, will temporarily drop the top tax rate on foreign earnings from 30 per cent to 5.25 per cent, encouraging US multinationals to return over $400 billion (€338 billion) to the US.
Supporters of the Bill, which was recently passed by the Senate finance committee, say that it could create 666,000 US jobs in two years. Ireland could be one of the countries most affected as some of the largest multinationals involved have bases in Ireland, including Dell, Hewlett-Packard and Intel.
But IDA Ireland said yesterday it should not be a relevant issue because the agency never used the retention of profits as a measure for foreign investment.
In fact, if US corporations were able to repatriate their profits it could provide a welcome shot in the arm for the US economy, which would in turn boost investment in the Republic, said an IDA spokesman.
According to the most recent annual report by the US Securities and Exchange Commission, Intel holds $6.3 billion abroad from foreign subsidiaries profits, while HP holds $14.5 billion. Intel has seen a huge growth in profits kept aboard, from $2.2 billion in 2000 to $6.3 billion last year.
A recent JP Morgan report said financial statements from the Standard & Poor's top 500 show $406 billion eligible for repatriation. Profits from smaller firms could bring that figure to $500 billion, the report said.
Mr Chris Matthews, a spokesman for Republican Senator Gordon Smith, one of the chief supporters of the Bill, said he expected it to pass in the full Senate floor, despite objections from Democrats. "The Senate likes this Bill and we see no reason why it would not pass. The only question is when," he told The Irish Times.
However, the Bill also has vocal opponents in the US Treasury Department who believe it goes too far and will allow corporations to pay virtually no tax.
More than 50 major US multinationals, including Intel, Nike, DuPont, Dell, Eli Lily and Texas Instruments, have set up an advocacy group called the Homeland Investment Coalition to pay for lobbying costs.
