Industry & Business

Ireland Starts to Feel Bite of US Tax Reforms

 Breaking News
  • Bluedrop Medical Raises €3.7 Million Investment HBAN has announced that Bluedrop Medical, a Galway-based Medical device start-up, has secured €3.7 million in funding to help manage one of the most devastating complications of diabetes – the diabetic foot. An initial seed investment of €1.2 million was led by HBAN’s MedTech Syndicate – which itself invested €340,000 in the seed round. Enterprise Ireland [...]...
  • NTR and Nord/LB Close Two Further Project Financings For a Combined €45 million NTR has successfully closed two project debt facilities back-to-back in recent weeks with Nord/LB  for a combined €45 million. The debt facilities are being used to finance the construction of two wind farms in the Republic of Ireland, both of which are expected to be fully constructed by the end of 2019 in time for awarding of the Irish government REFIT [...]...
  • Huckletree Announces European FinTech Hub in Dublin 4 Huckletree, the pan-European co-working space operator and accelerator, has announced it will open Ireland’s first fintech co-working hub in Dublin, establishing a European Fintech Hub similar to Barclays RISE, Level39 London and Lhoft Luxembourg. Located in The Oval, Ballsbridge, Dublin 4, the ambition for the fully equipped 23,500 sq ft space is to be a leading [...]...
  • Rye River Brewing Company Crowned the World’s Most Decorated Independent Craft Brewery Irish craft beer brewery, Rye River Brewing Company, has been crowned the world’s most decorated independent craft brewery at the World Beer Awards 2019. Rye River Brewing Company has achieved critical acclaim on the world stage, winning an unprecedented 21 World Beer Awards in 2019, officially making it the “World’s most decorated independent craft brewery”. The Celbridge-based brewery [...]...
  • Health Plan Technology Company Chooses Northern Ireland For New Software Engineering Centre American company HighRoads has announced that it is establishing a product development Centre of Excellence in Belfast to support its rapid growth, and the company plans to recruit at least 20 professionals over the next three years. This team will bring together experts in engineering, product management, and engineering operations to support the creation and expansion [...]...

Ireland Starts to Feel Bite of US Tax Reforms

Ireland Starts to Feel Bite of US Tax Reforms
November 14
09:44 2018

Executives around the world are cooling to the idea of investing internationally in the face of a rising trade tariff war between the US and China, and renewed US sanctions on Iran and Russia, as well as the EU uncertainty created by the looming prospect of a ‘no deal’ Brexit, writes John Whelan.

In its half-yearly assessment of foreign direct investment, the Organisation for Economic Co-operation and Development found that foreign investment flows had plummeted by 35% in the first half of this year. According to the OECD, at the end of last month, Ireland was one of the big losers in the fall-off in foreign direct investment.

It reported for the first half of the year decreases to Ireland, Switzerland and the US, with each economy dropping by more than $50bn (€44bn) and largely accounting for the overall decrease in investment to the OECD area. Foreign direct investment inflows to the OECD area, which accounts for over three quarters of global trade, reached their lowest levels in five years.

The falloff is primarily due to the large repatriations of earnings by US parent companies from their foreign affiliates because of tax reform in the US.

The 2017 US Tax Cut and Jobs Act contained several provisions that have had immediate and likely long-term impacts on direct investment.

John Whelan.

One key provision was the one-time tax on undistributed foreign earnings. This allowed US parent companies to repatriate cash held overseas in their foreign affiliates without additional taxes beginning in 2018.

Estimates of the amount of overseas cash held by US multinationals vary, but all indications are that it is substantial. Many corporations have already taken advantage of the low tax return option.

This repatriation by US parents caused large, negative investment flows from Ireland and led to negative overall inflows of investments.

The short-term impact of these repatriations on the foreign operations of US multinationals is likely to be minimal as they involve the sale or disposal of financial, as opposed to real, assets.

While these repatriations show the immediate impact of US president Donald Trump’s tax policies on foreign direct investment, the longer-term effects are difficult to predict due to the complexity of the international trade and uncertainty about how other countries will respond with counter measures.

Nevertheless, the US Tax Cut and Jobs Act has changed the incentives for US corporations to invest back home as opposed to in Ireland or other global destinations and the impacts could be significant and long-lasting.

In the first half of 2018, China was the largest recipient of foreign direct investment inflows worldwide at €112bn, followed by the UK at €58bn.

However, both of these countries could face significant declines in foreign investment over the coming years. In the case of China, the escalating trade war with the Trump administration has already seen a 10% tariff on an additional $200bn of goods exported to the US imposed in September and is now facing a further increase to 25% from January.

The long-term impacts are difficult to predict.

However, the strong investment flows into China recorded this year were mainly negotiated in 2016 and early last year and are unlikely to continue in the current trade climate.

Global business executives will be very reluctant to commence either fresh greenfield investment or merger and acquisition negotiations while the governments keep changing the rules of international trade.

Meanwhile, the publication last week of the first round of the UK government’s ‘technical notices’ in preparation for a potential no-deal Brexit was poorly received across Europe and in particular by the DUP in Belfast.

For all their detail, these documents only serve to highlight the gaping void facing the UK, and will only add to the reticence of business to investment.

IDA Ireland, which has a third of all its investment promotional offices in the US, may have to rethink its strategy.

John Whelan is managing partner of The Linkage-Partnership, an international trade consultancy with offices in Ireland, Holland and Switzerland.

About Author

admin

admin

Related Articles

New Subscriber

Subscribe Here



Advertisements





















National Manufacturing Conference & Exhibition 2018

NIBRT Springboard Success Stories



Upcoming Events

  • No upcoming events
AEC v1.0.4