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Ireland's low tax rate for businesses draws Obama criticism, defenders

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Sunday, Aug. 3, 2014, 11:00 p.m.
 

DUBLIN — Bewilderment best describes the response of Irish residents and tourists to President Obama's sharp criticism of American companies for acquiring facilities in Ireland to take advantage of the lowest tax rate in the world.

Some companies were “magically becoming Irish” to exploit the “unpatriotic loophole,” Obama said last week.

In the words of a pro-business Texan on vacation here, that smacked of typical “Chicago-style politics” by Obama to thwart efforts by American companies to boost profits legitimately rather than pay higher taxes at home.

“To me, it's common sense,” said Tim Lyman of Austin, a territory manager for Stanley Black & Decker. “American companies want to support America. They also want to make money.”

The United States could lower its 35 percent rate, Lyman said. In Ireland, the corporate tax rate is 12.5 percent.

Despite several other countries offering low rates, “the only country (Obama) mentioned was Ireland,” said Frank Smith, a Dublin actor and tour guide.

The story appeared on the front page of the Irish Times last week, reporting Obama's comments to CNBC and later at the Los Angeles Trade-Technical College.

The Irish paper quoted Irish government officials as saying it's a problem for the United States to fix.

During the past few years, companies have purchased facilities or merged with those in Ireland and other low tax-rate countries such as Switzerland and the United Kingdom.

Obama urged Congress to change tax law, saying the lost revenue contributes to the nation's budget deficit.

Dubliner Lorcan Collins, a historian and author, defended the choice of Ireland for major American facilities.

“They need a European headquarters somewhere. Why not here, in an English-speaking country?” said Collins, founder of the 1916 Rebellion Walking Tour. “The population is highly educated, and there's a diligent workforce.”

Collins would love to see companies such as Google, which has its European Union headquarters in Dublin, pay more in taxes. But if American companies are going to seek lower rates, Ireland might as well be the choice, he said.

“Do you go to Sweden or do you come to Ireland, which has emigrated people to the U.S. for 150 years?” Collins asked.

Fernanda Madeiros, 32, a server at Temple Bar in the heart of Dublin, essentially agrees with Obama. A native Brazilian working part-time in Ireland, Madeiros said big companies are “where all the money is. I think they should pay the higher rate.”

American companies should not be allowed to take advantage of lower tax rates in other countries, said Madeiros, a journalism student.

Back in the United States, David Taylor, executive director of the Pennsylvania Manufacturers Association, said the American tax rate for businesses is the “highest rate on Earth.”

“The tax rate in Ireland is the lowest among developed countries for trading (business) income,” said Bob Willens, a tax expert and publisher of the Willens Report in New York City. “They've long been known as a tax haven.”

He estimates no more than 100 American companies have merged or made financial moves to low tax-rate countries, including Ireland, since 2004.

Willens doubts Congress will act soon. Obama seemed to strike a political chord for Democrats to “exploit in the mid-term election” in November, Willens said.

Smith, guide of a literary walking tour for tourists, hopes it all blows over. “It would be disastrous” for Dublin's economy if Google pulled out, he said.

When Ireland joined the EU in 1973, there was enormous pressure to raise the tax rate, Smith said. Ireland's government said it was nonnegotiable, he added.

If the United States and the EU pressure Ireland to raise the rate, Ireland should respond by making the republic a “tax-free zone” — and watch companies flock to the Emerald Isle, he said.

The Associated Press contributed to this report. Brad Bumsted is Trib Total Media's state Capitol reporter. He can be reached at 717-787-1405 or bbumsted@tribweb.com.

 

 

 
 


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