February 17, 2011
By Staff Reporter
If companies are setting up abroad simply to avoid tax they cannot be too surprised if Uncle Sam sets out in pursuit. So-called “brass plate” operations seem to be growing likes weeds on the Cayman Islands for example, and for sure there are some of them in Ireland too.
However, the bulk of U.S. companies doing business in Ireland these past two decades or more have been engaged in bona fide manufacturing, albeit while paying corporate tax well below varying U.S. levels.
These companies were targeted before in the early 1990s but thanks to a deft insertion in the fiscal bill of the day by the late Daniel Patrick Moynihan, Ireland’s advantage was maintained just as the Celtic Tiger was about to makes its entrance on the world stage.
Now that the tiger has made an ignominious exit, stage left and right, Ireland is in the crosshairs again. Just as Moynihan’s timing was perfect from an Irish perspective, the Obama administration’s move seems anything but.
Ireland is down in economic terms and a hefty hike in tax levied from U.S. companies there could be one heck of an unwelcome kick. This is an emotive issue from whatever angle you look at it. With so many jobs lost to American workers in recent months it is hard to imagine much sympathy for the kind of big corporations that not infrequently seem indifferent, or even disloyal, to workers in their home country that have toiled away for years only to be unceremoniously shown the door as a result of downsizing, outsourcing, relocation or whatever.
Many of the corporations based in Ireland will argue that they set up operations there in order to gain a foothold in the European Union’s vast market. That’s fair enough.
Other companies, by contrast, scrap American jobs simply to recreate them in some other country. Indeed, some U.S. firms, Dell for example are doing just that in Ireland where jobs are being terminated with a view to recreating them in Poland.
IBM is doing the same thing here, recently announcing the elimination of American jobs that will reappear in India. This move has been accompanied by a sugary television advertising blitz on a “one planet” theme. That’s cold comfort in Peoria.
It’s a tough world out there for sure. Major companies and big countries are scrapping for any and every advantage in a global market turned sour.
Individual workers and their families, however, take the hardest hit of all. If the U.S. pushes ahead with its plan to raise taxes on companies in outright tax havens and countries such as Ireland – which is low-tax but not an outright tax haven – it is to be expected that there will be some dust kicked up in Congress and elsewhere. Some friends of Ireland on Capitol Hill, not least Congressman Richard Neal, who sits on the House Ways and Means Committee, will be getting their version of that 3 a.m. phone call.
Perhaps it would be wise, and it certainly would be welcome in Ireland, if the Obama administration considered a varied approach depending on precise circumstances in each of the locations is has placed on its tax hit list. Ireland isn’t Peoria. But it isn’t the Cayman Islands either. We await developments on this with interest.