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Ireland Fires Back At Obama Tax Policy Criticism

by Jason Gorringe,, London

28 July 2014

Ireland does not promote or encourage tax inversion by US multinationals, and is chosen by a "small number" of firms each year because of a combination of non-tax and tax perks, Ireland's Minister for Jobs, Richard Bruton, has said.

He said neither the Government, nor his Department, nor the country's enterprise agency advocates that companies "engage in any practices which bring little or no substance in terms of jobs or economic activity to Ireland."

Bruton said that the Government attracts business to Ireland as "a location for substantive multinational investment and jobs based on our track record, our talent pool, our technology capabilities." The "low, stable, transparent, statute-based corporation tax rate" forms just one element of our strategy for economic recovery, he emphasized.

Bruton's comments were made in the wake of an interview given by US President Barack Obama, in which he singled out Ireland as a low-tax location used by US companies. Speaking to CNBC, he accused firms of "gaming the system" by acquiring small Irish businesses purely to take advantage of Ireland's low corporate tax rate. He criticized those who "magically" become Irish companies "despite the fact that you may only have a hundred employees there, and you've got 10,000 employees in the US."

State investment agency IDA also reacted to Obama's claims. It said: "IDA Ireland's mandate is to create employment, investment, and real tangible benefits for Ireland via foreign direct investment (FDI). Engagements with investors revolve around convincing them to place activity into Ireland that comes with real economic substance, including employees and fixed assets."

"Transactions that rely solely on tax benefits, without substance behind them, don't bring economic benefits to Ireland," it said.

Last week, a new Grant Thornton report, Foreign Direct Investment in Ireland: Sustaining the Success, identified the factors positively contributing to the country's reputation as a place to do business. These include the pro-business environment maintained by successive governments, the continued economic recovery, and the quality of the workforce.

The report drew on the results of a survey conducted for Grant Thornton by Amárach Research. According to Brendan Foster, Partner for Business Consulting and Advisory: "Tax incentives for investors scored lower than other investment decision factors. Our 12.5 percent corporate tax rate continues to be a fundamental pillar in Ireland's FDI offering, but the predictability of the rate is as important as the rate itself."

Bruton's Department is due to publish a policy statement on FDI, and IDA Ireland is to develop a new strategy which will map out the future direction of FDI policy.

TAGS: tax | investment | business | Ireland | tax avoidance | tax incentives | foreign direct investment (FDI) | employees | corporation tax | tax planning | tax rates | United States | Invest

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