DUBLIN: US President Barack Obama has proposed a tax on profits earned by American companies overseas, a move which could have big ramifications for firms based in Ireland.
In his 2016 budget, Mr Obama proposes a 19pc tax on US companies’ future foreign earnings and a one-time 14pc tax on roughly $2 trillion (€1.6trn) of profits being held offshore, the White House said yesterday.
Revenues from the one-time tax would be used to fund infrastructure projects and fill a projected shortfall in the Highway Trust Fund. The United States’ inability to tax earnings by American firms located elsewhere has become a political football in recent years – and Ireland has been heavily criticised because of its low corporation tax regime.
Powerful US Senator Carl Levin has repeatedly called Ireland a “tax haven” and accused the Irish Government of giving a “special deal” to Apple that allowed the tech firm to pay a corporation tax rate of only 2pc.
Ireland has denied giving any special tax deals to companies.While Ireland attracts US firms for many reasons – such as its time zone and the fact that it is English speaking – the generous corporation tax regime has also played a large role. If Mr Obama was to tax overseas earnings, it would be one less reason for US firms to base themselves here.
The budget, which is set for release today, is as much a political document as a fiscal roadmap. It requires approval from Congress to take effect and full approval by the Republican-controlled legislature is very unlikely.
