Concerns around the impact on Ireland of the decision of President Donald Trump to effectively withdraw from an Organisation for Economic Co-operation and Development (OECD) corporate tax agreement continue to grow.
The tax deal, which Ireland signed up to in 2021, is described by the OECD as necessary to “ensure a fairer distribution of profits and taxing rights among countries and jurisdictions with respect to the world’s largest Multinational Enterprises”.
It would see Ireland moving from a long-held tax rate for corporations of 12.5% – seen as key to attracting many multinationals to headquarter here, and leading to burgeoning corporation tax receipts for the Exchequer. However, a chorus of criticism has grown in recent years from US commentators who believe the tax paid by US multinationals in Ireland belongs to America.
Last week, the Washington Post led with the headline: “Ireland got rich taxing U.S. companies. Trump could upend all that”, adding:
Trump says he wants to “reshore” U.S. companies, bringing their business activities and tax dollars back home. That would be tough for Ireland’s economy.
Reporting on the executive order signed by Trump, the Irish Times this morning said that:
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.
Critics of the Trump order say that it amounts to seeking the power to question the right of any country to tax American multinational corporations – and point to the new administration’s plans to enforce levies as a bid to force smaller countries to ” in effect, cede their tax sovereignty over US multinationals operating within their own borders”.
The Washington Post noted that “Ireland serves as a base for nearly 1,000 U.S. companies, including the European outposts of Apple, Google, Microsoft, Meta and Pfizer” – and that while “companies are drawn to Ireland for its English-speaking residents, skilled workforce and access to the European Union”, there’s “also the big perk of Ireland’s low corporate tax rate”. Also noted is that Ireland’s “economic model got a further boost with Trump’s tax revisions in 2017, along with measures introduced by the Organization for Economic Cooperation and Development, which discouraged the use of traditional tax havens with zero or extremely low tax rates, such as those in the Caribbean. Ireland, with its still relatively low corporate rate of 12.5 percent, emerged as an appealing alternative.”
Ireland became the “epicenter of activity” for U.S. multinationals looking to reduce their U.S. tax burden, said Brad Setser, a former adviser to President Joe Biden and a senior fellow at the Council on Foreign Relations. He noted that many U.S. firms in Ireland pay less than the headline tax rate, taking advantage of various loopholes.
“The U.S. has allowed its tax base to migrate to Ireland,” he said. “And whenever the U.S. tax law is up for negotiation, Ireland is vulnerable.”
Howard Lutnick, Trump’s pick to be commerce secretary, has name-checked Ireland in interviews and on social media. “Why is Ireland announcing a surplus? Give me a break. It’s all our business,” he told Bloomberg. “Have them pay their taxes in America, that is how you fix America.”
In 2024, corporation tax collected in Ireland amounted to €28.1 billion, the Department of Finance says, €4.3 billion (17.9 per cent) ahead of 2023 – and representing a quarter of the tax collected last year. U.S. multinationals account for about three-quarters of corporate tax revenue, the Irish Fiscal Advisory Council says. They have also pointed out that without multinational corporate taxes, Ireland would be running a deficit.
Trump’s executive order seeks to investigate “whether any foreign countries are not in compliance with any tax treaty with the US or have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies”.
Mathias Cormann, OECD secretary general, said in response that: “There have been concerns raised with us by US representatives about various aspects of our international tax agreement”, but that the organisation would “keep working with the US and all countries at the table to support international co-operation that promotes certainty, avoids double taxation, and protects tax bases”.
It all adds up to “worries for Ireland as Trump moves on corporation tax”, the Irish Times says of the looming tax war.