US corporate rate moves won't hit Ulster tax cut bid
Published 24/02/2012 | 08:00
Moves to reduce America's corporation tax and additional taxes on US firms operating overseas should not impact on a campaign to lower the rate in Northern Ireland, experts have said.
President Barack Obama has unveiled a series of measures including a minimum tax on profits made by US firms overseas.
Mr Obama is also planning to reduce the top rate of corporation tax in the US to 28% from 35%.
The Republic of Ireland's corporation tax rate of 12.5% is a key attraction for many companies to relocate there and moves are under way to lower the rate in Northern Ireland from 24% in order to compete for foreign direct investment.
A White House official said the measure was to discourage "accounting games to shift profits abroad" or actual relocation of production overseas.
Eamonn Donaghy, partner and tax expert at accountancy firm KPMG, said the news was no surprise.
"Obama is going for re-election and the best way to do that is to promise to preserve jobs," he said.
"The US rate is the highest in the G7 and only Japan has a higher rate in the world.
"Bringing it down to 28% will still leave the UK and especially the Republic, much better off.
"America will still want to export to Europe and have a European base.
"We have to stop thinking that this will put us in competition with America - the competition is with other European countries in attracting American firms."
Brendan Morris, Northern Ireland chair of the Chartered Institute of Taxation, said the proposals underline the challenges for the province as the corporation tax consultation process continues.
"The present competitive disadvantage with the Republic may be lessened as the proposed US minimum tax is introduced but we await details as to the level it will be set at to determine how material the impact is likely to be.
"Whilst the tax rate is very important, it is by no means the only consideration.
"At the start of the Northern Ireland consultation process in 2010, the Chartered Institute of Taxation surveyed its members for the purposes of responding directly to questions raised by the Northern Ireland Affairs Committee. A third of respondents said that non tax measure were at least as important, including improving infrastructure, availability of a well-educated workforce and stable local government."
Meanwhile, Conservative and Unionist MEP Jim Nicholson has expressed dismay over news that the introduction of an EU-wide tax rate may have come a step closer.
He was responding to reports that Germany and France had moved nearer full fiscal union by announcing that they will have "harmonised" their rates of corporate tax by 2013. The move was interpreted as increasing the prospect of an EU-wide enforced tax rate, something Britain has strongly opposed.
"That is not what Europe needs right now," he said.