THE FULL scale of the profitability of US investment in Ireland has emerged for the first time in official data which shows that the Irish operations of American firms made net profits of $48 billion in 2005, the latest period for which figures are available.
As president-elect Barack Obama prepares to take office after campaigning to broaden the US corporate tax base by reforming rules that enable firms to shelter their overseas profits from the US tax authorities, figures indicate that the profitability of US subsidiaries in Ireland is second in Europe only to the Dutch subsidiaries of US firms.
Figures from the Bureau of Economic Analysis (BEA), a division of the US commerce department, suggest US firms moved hugely profitable activities into Ireland as corporation tax was gradually cut to 12.5 per cent in 2003 from 38 per cent in early 1997.
Companies backed by IDA Ireland, 48 per cent of them from the US, directly employ a total of 152,000 staff here and many thousands more work in spin-off firms.
With tax policies set out by Mr Obama seen as a threat to inward investment into Ireland, the Minister for Foreign Affairs, Mícheál Martin, told the Dáil this week that the Government would adopt a "step by step" response to any moves by the incoming administration to disincentivise US companies from moving overseas.
"We must also be aware that such a policy change would require legislative input and we would obviously engage in making our position known to Congress and to public representatives there . . . There is a journey to go yet on this matter and we must be cautious about overreacting," he said.
The BEA figures show that the combined net profit of US corporations in Ireland was $8.58 billion in 1997, rose to $13.39 billion by 2000 and reached $31.3 billion in 2003. The $48 billion net profit in Ireland in 2005, declared in mandatory legal filings to the BEA, compares with $37.01 billion in Britain and $74.06 billion in the Netherlands. US companies in Germany made net profits of $11.22 billion in the same period, their French operations made $9.52 billion and their Italian operations made $8.58 billion.
Revenue figures show US companies in Ireland had combined sales of $151.52 billion in 2005. The Dutch operations of US companies had sales of $195.48 billion in that period and their British units $530.93 billion.
American companies in the Netherlands had an average net profit margin of 37.88 per cent and Irish operations had an average net margin of 31.68 per cent. The average net margin in Britain was 6.97 per cent.
