Obama acts to limit tax advantages for US firms in Ireland

May 5, 2009 by Infowars Ireland

US president Barack Obama speaks about tax reform as treasury secretary Tim Geithner looks on at the White House yesterday.

US PRESIDENT Barack Obama has proposed sweeping changes to tax rules for American companies operating in Ireland but stopped short of calling for a complete repeal of overseas tax benefits.

US multinationals would still be able to defer paying US tax on profits earned in Ireland but would no longer be able to claim tax deductions in America for expenses related to their Irish operations.

There was a cautious reaction here to Mr Obama’s proposals, which relate to Ireland and other low-tax countries.

A spokesman for the Department of Finance said: “We will be studying the proposals in detail to consider their impact on Ireland.”

A source close to the department said its initial view was that Mr Obama’s proposed measures will target offshore tax havens rather than countries like Ireland that offer low corporate tax rates but have transparent tax treaties with the US.

Mr Obama also wants to overhaul “check the box” rules that give companies great leeway in deciding where their subsidiaries should be taxed. The administration believes the rules, which were introduced in 1997, have encouraged US companies to take further advantage of low-tax regimes overseas.

A third proposal would tighten rules on the use of foreign tax credits to avoid paying US tax on some earnings.

“One of the strengths of our economy is the global reach of our businesses,” the president said as he announced the proposals at the White House yesterday.

“And I want to see our companies remain the most competitive in the world. But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens.”

Feargal O’Rourke, an international tax partner with PricewaterhouseCoopers in Dublin, said: “The good news is that their primary focus is on tax havens, which we are not. There is no abolition of deferral . That’s the really good news.”

In a briefing note accompanying yesterday’s announcement, the White House identified Ireland as one of three small countries, along with Bermuda and the Netherlands, accounting for nearly one-third of all foreign profits reported by US corporations in 2003.

“The bad news is that we were name-checked as a place where US foreign profits tend to reside,” Mr O’Rourke added. “It’s not nice to be name-checked by the leader of the free world.”

The Irish Government has lobbied the Obama administration energetically in recent weeks in an effort to avert changes in the rules governing tax deferral. It is understood that the IDA has deployed a senior executive to the Irish Embassy in Washington as a point person to monitor and engage with this issue.

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