US firms defend Irish corporate tax rate

24 Nov 2005

As a storm rages in the US over the use of Ireland’s corporate tax rate by American firms to reduce their tax bills, the president of the American Chamber of Commerce in Ireland Eoin O’Driscoll defended the 12.5pc tax rate.

O’Driscoll said recent reports in the media misrepresented the true situation and were potentially damaging to Ireland’s reputation as a preferred location for foreign direct investment.

In recent weeks it has been claimed that Microsoft used its Irish subsidiary to reduce its global tax bill by €500m on profits of US$3.8bn through a company called Round Island, with the result that the company paid US$324m in corporate tax in Ireland. It was also claimed in recent days that Google is also using a number of Irish-registered firms to reduce its tax bill.

The practice of using overseas subsidiaries to reduce tax bills in the US has been criticised in America, most notably by the New York Times calling for the closure of certain tax loopholes for US firms with overseas operations.

The US remains the single largest source of inward investment in Ireland. Today, almost 90,000 people are employed in more than 600 US companies, accounting for almost 65pc of all IDA Ireland-supported employment. Almost a quarter of all new greenfield US investment in to Europe comes to Ireland.

“Ireland has a strong network of tax treaties with all the major trading partners. Ireland operates a standard rate of corporation tax that applies to all companies (whether domestic or foreign) and to all traded activities in Ireland. The system is open and transparent,” said O’Driscoll, who was speaking at the chamber’s annual thanksgiving lunch today. The lunch was addressed by Finance Minister Brian Cowen TD.

O’Driscoll continued: “Ireland’s taxation regime stimulates investment here and maximises revenue to the Exchequer. Any changes could have far-reaching consequences and could negatively impact on our ability to generate and sustain wealth in Ireland.

“Global competition for foreign direct investment is intense with many countries offering lower effective tax rates than Ireland’s 12.5pc.” For example, countries such as Estonia have a zero percentage corporate tax rate and boasts a 100pc broadband infrastructure as well as a young, well-educated population.

“In this environment we must continue to use our traditional strengths that include education, agility, business culture and an effective taxation regime while we build additional new capability in market knowledge, research and technology,” O’Driscoll.

By John Kennedy