Trump has introduced a monumental $1.5 trillion tax cut package
The tax reform plan is set to be signed into law by Christmas
America’s corporation tax rate will fall from 35 percent to 20 percent
DUBLIN, Ireland - With U.S. President Donald Trump introducing a $1.5 trillion tax cut package, tax experts now believe that Irish companies with a substantial foothold in America could be hit hard.
Irish tax experts have said that as part of the Trump administration’s monumental tax reform plan, set to be signed into law by Christmas, America's corporation tax rate will fall from 35 percent to 20 percent, which is above Ireland's 'red line' corporation tax rate of 12.5 percent.
However, fears are high that with the raft of changes planned, U.S. firms will be taxed at a special low rate of 12.5 percent on their IP in a bid to get them to bring those assets back to America.
This, Joe Tynan, head of tax at PwC said is set to affect Irish firms selling goods and services into the U.S.
Tynan said, "Irish Plcs who have substantial operations in the U.S. will be affected.”
In recent years, the two-way trade between Ireland and the U.S. has increased and is now valued at more than $590 billion.
So far, Irish firms have invested more than $85 billion in the U.S., and currently employ more than 80,000 people across 50 states.
Tynan explained that while Irish companies with a presence in the U.S. will benefit from the corporate rate reduction, they will be negatively affected by reforms that reduce the interest deduction that is allowed to a proportionate amount of their global interest payments.
Tynan said, “As most Irish companies borrow in the U.S. rather than Ireland, due to the higher tax deduction, this will have a significant impact. The U.S. tax changes also reduces the payments that can be made by a U.S. company to a connected company for services, royalties and in the House bill for goods. This could also negatively affect Irish companies selling into the U.S.”
In the run-up to the passing of the Tax Cuts and Jobs Act 2017, Trump repeatedly singled out Ireland.
In October, while addressing reporters in the White House, Trump said, "I hear that Ireland is going to be reducing its corporate rates down to 8 percent from 12 percent."
However, Taoiseach Leo Varadkar, who insists that the overall trade flows between Ireland and the U.S. are "remarkably balanced,” told the Dáil, "I can confirm that President Trump's claim that we are proposing to reduce our corporation profit tax to 8 percent is indeed fake news.”
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