Belfast Telegraph

Thursday 2 October 2014

Ireland rejects Obama criticisms

Barack Obama (right) has criticised companies that take advantage of Ireland's low-tax policies

Enterprise chiefs have defended luring companies to Ireland after US president Barack Obama accused multinationals of relocating to exploit unpatriotic tax loopholes.

In one of the most outspoken attacks on the state's popularity for big business, Mr Obama singled Ireland out for special criticism over firms "gaming the system".

The broadside prompted state investment agency IDA to insist that it does not promote the use of brass plaques for companies to base themselves in Ireland.

A spokeswoman said US firms which relocate solely for tax purposes and without a substantial presence bring no economic benefits.

"IDA Ireland's mandate is to create employment, investment and real tangible economic benefits for Ireland via foreign direct investment," the IDA said.

"Engagements with investors revolve around convincing them to place activity into Ireland that comes with real economic substance, including employees and fixed assets.

"Transactions that rely solely on tax benefits, without substance behind them, don't bring economic benefits to Ireland."

The IDA spokeswoman said the agency's work was focussed on job creation and capital investment.

Mr Obama's hardline remarks have taken the diplomatic row over tax avoidance by multinationals to a new level.

In a speech in California he accused the companies that relocate for tax purposes or use takeovers of smaller, foreign companies to create a new base of exploitation.

Later in an interview on business news television CNBC, the President named Ireland as one country where US companies are taking advantage of technically legal tax arrangements.

Ireland's standard corporation tax rate is 12.5%. In the US the same tax is about 35%.

The controversy also tainted a trade mission to California involving Taoiseach Enda Kenny earlier this year when, during a visit to San Francisco, governor of the state Jerry Brown took a swipe at Ireland's tax regime.

The politician said Apple was now an Irish company and said California would be an independent country if it had Ireland's tax laws.

Ireland is one of three countries being investigated by the European Commission over tax breaks which pulled in multinationals, including saving Apple hundreds of millions in its bills.

Jobs Minister Richard Bruton said the Government, his department and the enterprise agencies do not promote or encourage companies to engage in any practices which bring little or no substance, in terms of jobs or economic activity, to Ireland.

"The 'tax inversion' practices referred to in recent days and weeks are not the product of any features of our tax system, we are not in favour of them and do not promote or encourage them," the minister said.

"Ireland features in only a small minority of these cases worldwide, which also relate to a range of other developed countries.

"As part of our recovery strategy, we will continue determinedly to promote Ireland as a location for substantive multinational investment and jobs based on our track record, our talent pool, our technology capabilities.

"Our low, stable, transparent, statute-based corporation tax rate is one part of this strategy and we are absolutely committed to that rate.

"We are convinced that, by continuing to implement our plan, we can continue to rebuild our economy and attract the investment and job-creation we need."

Mr Bruton said that over the last three years more than 18,000 jobs were created in multinational companies.

The minister said the improvement was continuing, with a 10% increase in the amount of new positions in the first six months of the year compared with the first half of last year.

Mr Obama was dealing specifically with companies which relocate their headquarters in order to take advantage of lower corporate tax rates, a system known as inversion.

It differs from the criticisms over Apple as it is still based in California although large chunks of its business are routed through Ireland for tax purposes.

The American Chamber of Commerce said there had been about 70 examples of US companies shifting their HQ overseas in the last decade with the UK, the Netherlands, Switzerland and Ireland among the prime locations.

About a dozen have come to Ireland in that time.

Sinn Fein finance spokesman Pearse Doherty said Ireland has been fingered over its company tax regime for over two years now.

"The response of the Irish Government, and of Fianna Fail and establishment agencies has been to deny, deny, deny," Mr Doherty said.

"They seem to see this as some sort of perverse patriotism, when in fact in it this ostrich approach that has left Ireland exposed and potentially under threat of job losses.

"Multinational companies have made an invaluable contribution to the Irish economy and it is vital that we keep their revenue and the jobs created - but also that we are aware if any event or sequence of events has the potential to threaten investment in Ireland and that we cancel the threat, or plan for it. That's good governance."

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