The primary lobbying mechanism for US multinationals in Ireland is the American Chamber of Commerce Ireland, which makes an annual pre-budget submission to the Department of Finance.
The submissions are published on the department’s website as well as that of the chamber itself and form a key part of the ongoing effort to keep Ireland competitive in terms of attracting foreign direct investment.
Ireland’s extraordinary success in that regard is regularly cited in these submissions. In the November 2012 submission for the 2013 budget, the chamber noted that, during 2011, Ireland had attracted more foreign direct investment from the US ($30.5 billion) than had developing Asia.
In the document, it urged the Government to continue pursuing certain policies in relation to the Single European Market, and continued: “However, more fiscal and economic integration must not mean harmonisation of key features of national tax systems. It is a vital national competitive interest that Ireland’s corporate taxation regime with its headline rate of 12.5 per cent remains. We support the Government’s stated opposition to a common consolidated corporate taxation base (CCCTB) within the euro zone/EU.”
The chamber said Ireland was “a unique gateway for US mobile foreign direct investment into Europe. Any attempt to reduce Ireland’s attractiveness as an investment location by harmonising taxes on enterprise across the EU will divert investment from both Ireland and the EU itself to other competing jurisdictions”.
Among the matters covered by the submission were the relatively high cost of doing business here and the recommendations from the National Competitiveness Council. On income tax and PRSI rates, the chambers said it was "critical" that there be no further increases. It also "strongly recommended" that pension contributions continue to qualify for tax relief at the higher income tax rate.
Submissions
As can be seen from the document, the chamber's interest in Irish economic and taxation policies is comprehensive and reflective of a long-established symbiotic relationship between Ireland and the US multinational sector. Such is the importance of the sector to Ireland that it accounted for 73 per cent of our corporation tax take in 2011.
According to the head of the chamber's tax working group, Anna Scally, the annual pre-budget submission and the associated meetings with officials to discuss it, is its primary way of contributing to Irish economic and taxation policy.
However, it is not the only one. Foreign companies investing in Ireland regularly cite the relatively easy access to key political figures and decisionmakers, both in a formal setting and informally at events around the State. Smaller companies, in particular, marvel at access which they say would simply be impossible in their home markets.
The chamber also regularly makes submissions when government departments invite the views of interested parties on certain policy issues. Scally authored an August 2012 submission to the Department of Finance on the rules governing the residency test for individuals, supporting the current regime.
In relation to the current controversies over Ireland’s role in the affairs of multinational companies, she points out that it is the US taxation regime that is at play. It is the nature of the exemptions that exist in the US under the so-called Subpart F rules that are at the heart of the matter and these can only be changed by the authorities in the US.
Nevertheless, she believes it is worth considering whether there are aspects to Irish corporate and tax law that might merit change, given the need to protect Ireland’s reputation internationally.
Any such review would have to be done in a calm manner and taking into account where the balance of Ireland’s interests lie, she says.
The US system for taxing its multinationals is unique and complex, and the debate on introducing change has been going on for years. The US, when introducing change, will not want to do anything that disadvantages its huge multinational sector.
The OECD is also looking at the issue of tax base erosion and profit shifting, and Scally believes that this is the correct forum for discussing change in international tax policy and is a forum where Ireland is fully engaged.
Another organisation that makes regular submissions on tax policy is the Irish Tax Institute. According to its chief executive, Mark Redmond, the twin focuses of its submissions in recent years have been on reducing the administrative burden for taxpayers, and on assisting FDI and the SME sectors to retain and protect jobs.
He is particularly critical of what he says is the insufficient time that is given to the Oireachtas to scrutinise the changes to the tax law that are introduced with each year’s budget.
Reputational damage
On this week's hearings in Washington, he says the most important point to note is that the chief executive of the world's largest company (Apple) said that the US tax system is not working and appealed to its politicians to fix it.
“Everyone recognises that the taxation system has not kept up with the pace of developments in the digital world.”
Addressing change in the complex world of international taxation affairs is best left to such bodies as the OECD, he maintains. Asked about recent reputational damage for Ireland, he said it was generally recognised that the problem of taxing multinationals is a global one. He does not see any need to introduce unilateral changes to the Irish regime to address the issues that have emerged recently during committee hearings in the US and UK.
Another important input into Ireland’s taxation regime occurs through the big four accountancy firms. They are au fait with changes introduced in competitor economies, are constantly looking to represent the interests of their clients, and have regular contact with Government.
