Tax status a concern for 1973 government

The Irish government made diplomatic representations to the US in 1973 over concerns that an American measure to tax companies operating here would result in a 40 per cent cut in the industrial growth rate.

More recently a source of controversy with some of Ireland’s fellow-member states in the EU, Ireland’s taxation system was just as geared towards attracting foreign investment in the early 1970s as it is today.

According to a US diplomatic report published yesterday by WikiLeaks, a delegation of senior Irish officials met the US ambassador to Ireland, John DJ Moore, in March 1973 to discuss American attempts to regulate so-called tax-holiday countries and the phenomenon of "runaway plants".

The phrase “runaway plant” was a term used to describe factories that closed in the US and reopened in a lower-cost country.

In a diplomatic cable to the US department of state, Mr Moore said Irish officials had told him that as the least developed member of the European Community, 80 per cent of Ireland’s growth would have to come from foreign industrial investment. Of this as much as 50 per cent came from the US.

“Irish estimate that US taxing of subsidiary earnings in Ireland could cut Irish industrial growth rate by as much as 40 per cent.”

The Irish government was “deeply concerned” over the measure to tax foreign subsidiaries and it would “completely negate” the principal incentive used to attract companies here. The incentive in question relieved companies from paying tax in Ireland on profits derived from exports of goods made here. Echoing more recent pronouncements by Irish officials and politicians in defence of the corporate tax rate, it was pointed out at the meeting that Ireland faced a “very special situation”.

Another Wikileaks-leaked document, dated October 9th, 1973, highlighted concerns the US had that Ireland could become “one of the more difficult” members of the European Community. Describing US-Irish relations as “excellent”, the cable says “those in the power queue of both major parties are generally well-disposed toward the United States”.

Originally classified as secret, the document warns that Ireland's neutrality and its position in Europe could become problematic in the relationship between both countries.

“In the years ahead we expect that Ireland will be one of the more difficult members of the EC for us to deal with, specifically in the area of defence, because of Ireland’s traditional neutrality; and in the reduction of agricultural trade barriers, because Ireland is a major agricultural country.”

Commenting in another document assessing newly elected taoiseach Liam Cosgrave’s cabinet make-up, Mr Moore said the Cabinet was “carefully balanced between liberals and conservatives and which should be responsive to his personal authority”. Mr Moore said the “greatest surprise” was the assignment to the department of foreign affairs “rather than finance” of Garret FitzGerald, whom he described as “a brilliant economist”.