Obama's offshore tax reforms prompt jitters in Ireland
Closing a corporate tax loophole could yield $60 billion for the US, but it threatens to undermine an already weak Irish economy.
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It's hard to find anyone with a beef against the majority of the tax reform proposals – closing loopholes, cracking down on the abuse of tax havens, and giving greater resources to the IRS. It's the possible impact on overseas operations with legitimate, nontax reasons for being there that has businesses antsy until the details are fleshed out.Skip to next paragraph
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"There is that sense that when people look at what are brass plate operations, they fail to distinguish how real the footprint of most of these multinationals is in Ireland, and how central their Irish operations are in terms of their global reach," says Austin Hughes, chief economist with KBC Bank in Dublin.
"The reason they're here is partly taxes, but also it's because Ireland is a very similar economic model to the US," Mr. Hughes adds. "American companies will find a workforce that is young, that is well skilled, that is – and this tends to be dismissed sometimes – English speaking. There are very significant cultural similarities and it's easy to do business here."
Ireland hopes to keep US businesses
Richard Bruton, deputy leader of the opposition Fine Gael party and the man many believe will someday serve as finance minister, says Ireland is scrambling to help keep US businesses from fleeing.
"It is worrying that [Obama] put us up there in the headlights," he says. "It demands a very high level strategy from government to analyze, anticipate, lobby, and to work with companies based in Ireland to help them maintain their Irish operations in the face of this new threat."
Could it backfire?
It's not just the Irish who have a lot riding on this. Britain fears that all of the financial jobs lost during the banking crisis will never return, but instead be repatriated to the US.
In India, another country which made it into Obama's briefing, the president of the Associated Chambers of Commerce and Industry, Sajjan Jindal, warned that the US could be the biggest loser in all of this.
Resorting to "protectionism tendencies will kill the spirit of competition and dilute spirits of World Trade Organization," he says.
It's a sentiment that echoes much of the criticism the measures have drawn in the US. The Business Roundtable, the National Association of Manufacturers, and the Silicon Valley Leadership Group are just three on a long list of irate business groups that have spoken out against the reforms.
Diplomatic jousting begins
The new rules won't become law until next year, which leaves the rest of this year for an intense diplomatic offensive. In that regard, it's worth noting that within a week of the release of the White House briefing, that provocative paragraph citing the Dutch, Irish, and Bermudans disappeared. Evidence of the president's susceptibility to diplomacy and lobbying?