Ireland faces a fresh threat to its income from American multinationals operating here after US president Donald Trump moved to pull his country out of a landmark global corporate tax deal, setting up a potential stand-off between his administration and the European Union.
The US president made the move in an executive order, withdrawing US support for the global tax pact agreed at the Organisation for Economic Co-operation and Development (OECD) last year that allows other countries to levy top-up taxes on US multinationals.
Mr Trump said the US would be withdrawing from the deal that aimed to make companies pay a minimum corporate tax rate of 15 per cent. Importantly for Ireland, he also announced plans to retaliate against countries applying “extraterritorial” levies on US multinational firms, in a further sign the US president intends to seek to rewrite global tax regimes to favour US companies.
Ireland signed up to the OECD tax deal in 2021, agreeing to shift from its long-held 12.5 per cent corporate tax rate, to align with a new minimum global rate of 15 per cent. With Ireland home to the regional headquarters of many US multinationals, it could be in the firing line of this move by Mr Trump.
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The exchequer took in more than €39 billion in corporation tax last year, up 64 per cent year-on-year. Excluding taxes tied to Apple back taxes, the receipts still increased 18 per cent to €28.1 billion and are a vital source of income for the State.
The Department of Finance “is currently examining president Trump’s memorandum on the OECD global tax deal,” IDA Ireland said in a statement. “Ireland signed up to the OECD deal in October 2021 and IDA Ireland welcomes the clarity on taxation that the agreement provides for our client companies which helps inform their investment decision-making,” the agency said.
“It is important to note that, while tax is important, it is not the only factor at play in attracting FDI into Ireland. We will continue to liaise with the Department of Finance regarding the detail of president Trump’s memorandum,” it added.
Mr Trump added that a “list of options for protective measures” should be drawn up “within 60 days”, putting signatories to the OECD pact – including EU member states, the UK, South Korea, Japan and Canada – on notice that Washington intends far-reaching challenges to global tax rules.
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Speaking on Tuesday, EU economy commissioner Valdis Dombrovskis said it regretted the move by Mr Trump to pull out of the landmark tax deal. Mr Dombrovskis said the European Commission, which sets EU trade policy, remained committed to the tax reforms.
“While the commission regrets the content of the [executive] memorandum, we trust that it is worth taking the time to discuss these matters with the new US tax administration in order to better understand their asks and explain our position,” he said.
Many of the exact details of policies Mr Trump set out in his inauguration speech and statements afterwards still remain to be seen, he said.
Department of Finance officials are currently studying the text of the White House order pulling the US out of the OECD tax deal. “We take note of the concerns raised by the incoming administration and their commitment to examine matters over the coming months,” a spokeswoman said.
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The executive order said the US Treasury would also be tasked with investigating “whether any foreign countries are not in compliance with any tax treaty with the United States or have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies”.
Mr Dombrovskis noted that, “contrary to expectations”, the US president had not announced plans to slap high tariffs on goods imported into the US from abroad.
EU officials in Brussels and Irish officials in Dublin are still bracing for the new White House administration to announce tariffs on imports from Europe, a promise Mr Trump regularly made on the campaign trail. There are fears trade tariffs levelled by the US will draw similar measures from the EU in retaliation, in a back-and-forth cycle that could escalate into a US-EU trade war.
“It’s clear that we are still operating in a period of uncertainty as president Trump and his administration are just unveiling their plans,” Mr Dombrovskis said. The EU wanted to foster “a stable, balanced and predictable economic and trade partnership with the United States”, he said.
Speaking earlier, EU trade commissioner Maroš Šefčovič also said Europe’s preference was to maintain its strong economic partnership with the US. However, the union would be prepared to defend its interests if necessary, he said.
Mr Šefčovič said he regretted Mr Trump’s decision to pull the US from the Paris agreement to fight climate change, which “continues to be the best hope for us all”. In response the EU would “stay the course” and continue its efforts to transition towards a greener economy, he said.
– Additional reporting by the Financial Times
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Publish date : 2025-01-21 22:00:00
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