Irish Economy Vulnerable To US Tax Changes, Brexit

by Jason Gorringe, Tax-News.com, London

20 January 2017

A lower corporate tax rate and additional trade disputes in the US and the UK leaving the European Union will impact Irish economic growth in 2017, according to a report from financial services provider Merrion Capital.

In its latest Irish Quarterly Economic Outlook, Merrion said that US President Donald Trump's planned tax cuts and public spending measures could "fire up the American economy, which in turn should be positive for the Irish economy." However, Merrion did warn that "the possibility of lower US corporate tax rates and talk of trade tariffs being imposed by the Trump Administration could potentially outweigh any positives."

Merrion added that it is possible to only speculate as to how the UK's withdrawal from the EU will impact Ireland in the coming months and years. It noted that 30 percent of all Irish employment is from sectors that are heavily reliant on UK exports. It expects SMEs, particularly in the agri-food and tourism sectors, to be harder hit than larger companies by the introduction of any tariffs or barriers to trade.

According to Merrion, the Irish economy "appears to be holding up very well, even though export growth has slowed." It does nevertheless expect Brexit worries to intensify in 2017, leading to lower overall GDP growth this year. It anticipates GDP growth to fall below four percent in 2017.

Merrion warned the Government against bowing to pressure to increase public sector pay, "which, if granted, will have to be taken out of money that could have been spent on crucial services." In turn, it cautioned, the Government would have to raise taxes, which would damage the economy.

"The last thing the Irish economy needs now against the uncertain Brexit backdrop and the Trump Presidency is to become uncompetitive again," Merrion said.