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The American Chamber of Commerce in Ireland will launch Retuning the Growth Engine, a paper which sets out the blue print for building an innovation and commercialisation base in Ireland, on Wednesday the 21st March at Bank of Ireland, College Green, Dublin. The paper will be presented to Minister for Enterprise, Trade and Employment, Micheál Martin TD at a breakfast seminar hosted by Bank of Ireland Corporate Banking, who sponsored the production of Retuning the Growth Engine. In light of the Government’s Strategy for Science, Technology and Innovation (SSTI), the American Chamber of Commerce says that the time is right for a new type of partnership between ‘Ireland Inc’, the Irish Government, and the US multinational companies who have together enjoyed such successful working relationships in Ireland. In this year so far, US firms in the key sectors of the economy have underlined the backwash on international competitiveness of the hyper-growth in the Irish construction sector that has been fuelled by significant tax incentives. The world's top pharmaceutical manufacturer Pfizer, announced in February that it planned to make 65 staff redundant and sell two Cork plants employing 480 workers; The world's second biggest mobile phone company Motorola, announced the closure of it Cork software centre with the loss of 330 jobs and the world's biggest consumer products company Procter & Gamble announced the planned loss of 280 jobs at its Nenagh plant. Canadian/US company Thompson Scientific announced plans to relocate services to India and the loss of 200 jobs in Limerick; US firms Zomax and Bourns Electronic plan to shed 98 and 80 jobs respectively in Dublin and Cork while US firm Xerox may shut its call centre near Blanchardstown, North-West Dublin with the possible loss of 1,000 jobs. Employment growth in the Irish economy continued to increase in 2006, with construction, public administration, education and health accounting for 53,000 of the additional 83,000 jobs in the economy. During 2006, employment levels supported by the development agencies (Enterprise Ireland, IDA Ireland, Shannon Development, and Údarás na Gaeltachta) increased by 5,927 to 305,062 – 2,913 permanent full-time jobs in foreign-owned companies, and 3,014 in Irish-owned companies.
Within days of pharmacist Senator Minihan's silence on pharmacy deregulation, he issued press releases on both Thurs, March 15th and Friday March 16th on the proposals of the opposition Fine Gael Party on stamp duty reform. On Thursday, Minihan said that the Fine Gael proposals were "a belated and limp effort...from the people who made stamp duty so unfair." So the man who had nothing to say about the 10-year delay in deregulating his own sector, criticises an opposition party for doing nothing about stamp duty reform while his own party was in Government! In the 10-year period 1996-2006, Irish house prices rose by 270%. It's an easy option to offer tax lollipops to the electorate rather than Minihan challenging his own parliamentary colleague Tom Parlon, who is President of the Progressive Democrats. Parlon has said that any change in the corrupt land rezoning system that creates an artificial scarcity of land, would be to the "left of Stalin." Site costs as a percentage of the cost of a house, have doubled in ten years and there have been no crocodile tears from the Senator about the impact on "city dwellers." PD Party President Tom Parlon, then leader of the Irish Farmers' association, had forced the FF/PD government in 2001 to concede a bonanza for farmers from roadbuilding. Up to €4.6bn of the €18.5bn of taxpayers' money that will be spent on new main roads over the next decade, will go into the pockets of landowners. Fred Barry, chief executive of the National Roads Authority is reported as saying that the increases in the cost of land for major roads projects are "disturbing".
Tax the only remaining incentive for US Multinationals Microsoft Ireland Managing Director Joe Macri, said in January 2007, that the Republic of Ireland's corporation tax rate of 12.5% is the prime reason why multinational companies choose to remain in Ireland. While access to the EU and the availability of cheap labour were key factors in attracting foreign investment here 20 years ago, these have largely been eroded by rising costs, falling productivity and the enlargement of the EU to central and eastern European countries, he said, adding: "That leaves us with tax." Also in January, the American Chamber of Commerce Ireland President said that the Government needs to restate it's commitment to the lowest possible tax rate rather than suggesting 12.5% is ‘as good as it gets' particularly in light of the global trend towards lower levels of income tax especially on corporate profits. The newly-appointed President of the American Chamber of Commerce in Ireland, Jim O'Hara, has said that Ireland should be justifiably proud of its economic achievements over the past two decades. But that Ireland is now facing it's most serious challenge yet as it seeks to maintain its position as a preferred location for foreign direct investment. "Ireland is a politically stable, pro business, open economy with many attractions and we can be justifiably proud of our success. But we are continually moving up the cost league table and some of our traditional advantages have been eroded," he said. O'Hara, who is General Manager of Intel Ireland, called for increased focus and urgency to address the weaknesses in Ireland's competitive armoury. Tax and Ireland as a Tax Haven Swiss cantons have the lowest corporate tax rates in Europe and the European Commission is angry because of the tax incentive for European and other companies to move there. The corporate tax rate of the Swiss canton of Obwalden is 6.6% compared with Ireland's low rate of 12.5%. In 2005, two US multinationals, Procter & Gamble and Colgate, relocated their European headquarters to Geneva. Biogen Idec, the US biotech group and partner of Irish drugs company Elan, transferred from Paris to the Canton of Zug. In January 2007, US company Kraft Foods announced that it would move its European headquarters to Zurich from Vienna and London later this year. Ireland's rate of 12.5% remains among the lowest in the world and there is a tax exemption on patent income. There are two different aspects to US multinational operations in Ireland. There are the physical operations in Ireland, be it a manufacturing plant or a financial service operation in Dublin's International Financial Services Centre and the tax haven facility where very few are employed but the system nevertheless provides an estimated €2-€3 billion in annual tax income for the Irish Exchequer. In November, 2005, The Wall Street Journal wrote that "a law firm's office on a quiet downtown street [in Dublin, Ireland ] houses an obscure subsidiary of Microsoft Corp. that helps the computer giant shave at least $500 million from its annual tax bill. The four-year-old subsidiary, Round Island One Ltd., has a thin roster of employees but controls more than $16 billion in Microsoft assets. Virtually unknown in Ireland, on paper it has quickly become one of the country's biggest companies, with gross profits of nearly $9 billion in 2004." Another Dublin-based Microsoft -owned company Flat Island Company made a profit of $802.4 million in 2004 on sales of $2 billion, but paid no tax. It issues licences for software in Europe, the Middle East and Africa. The Wall Street Journal said in its November 2005 report that : "Ireland's citizens may not have heard of Round Island One, but they benefit greatly from its presence. Last year the unit handed the government of this small country of four million citizens more than $300 million in taxes. The citizens of other nations where Microsoft sells its products are less fortunate. Round Island One provides a structure for Microsoft to radically reduce its corporate taxes in much of Europe, and similarly shields billions of dollars from U.S. taxation. Giant U.S. companies whose products are heavily based on their innovations, such as technology and pharmaceutical firms, increasingly are setting up units in Ireland that route intellectual property and its financial fruits to the low-tax haven -- at the expense of the U.S. Treasury." The Journal wrote: "Much of Round Island's income is licensing fees from copyrighted software code that originates in the U.S. Some of the rights to these lucrative assets end up in Ireland via complex accounting rules on intellectual property that the Treasury is now seeking to overhaul. The Internal Revenue Service said it is also looking closely at how companies account for such transactions. In a statement, Microsoft said its European units "report and pay significant amounts of taxes" and that Microsoft "is fully compliant with the tax laws of the United States and all other countries." Through a key holding, dubbed Flat Island Co., Round Island licenses rights to Microsoft software throughout Europe, the Middle East and Africa. Thus, Microsoft routes the license sales through Ireland and Round Island pays a total of just under $17 million in taxes to about 20 other governments that represent more than 300 million people." Months after the Journal report, Microsoft requested the Irish Companies Registration Office to change the status of Flat Island and Round Island to unlimited companies, to prevent any further filing from being publicly available. Irish holding companies of US consumer products giant Procter & Gamble, recorded $1.1 billion in profits in 2005 while its manufacturing plant in Nenagh, County Tipperary, which it plans to downsize, posted a profit of €7.6 million. Last month, it was reported that US electronics firm SanDisk, posted a profit of $105.96 million on revenues of $955 million in the eight months after its Irish unit started business in April 2005, with a payroll of four staff. It seemed that US multinationals would continue to use Ireland as a tax haven, while physical operations were scaled back because of the uncompetitive cost structure of the Irish economy.
However, last week, US drug maker Bristol-Myers Squibb confirmed that it is moving assets of up to $25 billion from an Irish holding company. A company spokesman told Reuters the liquidation of assets in Bristol-Myers Squibb International Holdings Limited was "part of the company's ongoing review of its financial operations." "It's a holding company. It does not have any business operations or workforce. This action will not have any impact on the day-to-day operation in Ireland," said Brian Henry, regional spokesman for Bristol-Myers Squibb, which also has two factories in Ireland. Henry is reported to have declined to comment on a report in The Irish Times that the move was to benefit from even lower corporate tax rates elsewhere than the 12.5% rate in Ireland. Bristol-Myers Squibb also refused to say where it was transferring the assets of the holding company, which owns subsidiaries in the United States, Europe, Latin American and Asia. The Irish holding company had pre-tax profits of €1.66 billion ($2.2 billion) in 2005. In 2005, there were large scale repatriations of profits from Ireland following a tax amnesty that was passed by the US Congress in late 2004, which temporarily reduced the US corporate tax rate from 35% to 5%. Ireland is the most profitable overseas location for US multinationals because of the facility to route profits from other overseas locations, via Ireland. In 1996, Labour Party TD Ruairí Quinn who was Minister for Finance, proposed a general Irish corporation tax rate of 12.5%. The rate was agreed by the European Commission but a proposal to reduce the rate would likely meet opposition from other EU members. © Copyright 2007 by Finfacts.com |
