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WHILE WE WAIT for the US presidential election on Monday, let’s examine the age-old question that haunts democracy: what do I get out of it?
Shortly after Donald Trump took office, his adviser Stephen Moore warned that there would be “a flood of companies leaving Ireland … to return to the United States” after his corporate tax rate was lowered to compete with the infamously low Irish rate of 12.5%.
In August 2017, Moore said that construction and manufacturing jobs had to return to the US, saying, “… It can’t be done in Ireland and all these other places. You have to bring this job back to this country so that American workers can benefit. “
As early as March 2016, and as recently as May of this year, Trump threatened to bring pharmaceutical companies to the United States as well.
Although the US lowered its corporate tax rate from 35% to 21% in 2017, Ireland has not seen a massive exodus of companies to the US, but if Trump, and to a lesser extent, the Republican party, won Another four years to pursue these policies, would it happen then?
And what about Democratic candidate Joe Biden: would he crack down on the multinationals that power Ireland’s economy?
A post-Brexit deal
The fact that we obtain a Free Trade Agreement between the EU and the UK before the end of the year could be an unintended consequence of the outcome of the US presidential elections.
If Biden wins, UK Prime Minister Boris Johnson has lost a powerful friend: Biden, House Speaker Nancy Pelosi, and Democrats have been adamant in defending the Good Friday Agreement before. start any conversation about a free trade agreement between the United Kingdom and the United States.
However, if Trump is re-elected, it could mean that Boris Johnson will play tough with the EU and drop trade talks in favor of a closer deal with the US.
Ivan Rogers, a former British ambassador to the EU, told The Observer this week that “several very important sources” in European capitals told him that they believe Johnson will await the outcome of the US presidential election before opting for a subsequent trade deal. to Brexit.
“There is a lot of hectic repositioning right now here in London by this administration in Britain,” former Conservative Finance Minister George Osborne told CNN on Sunday.
“But I don’t think Joe Biden is particularly fond of this British government, and they will have to work very hard to change that,” he said.
Under Trump’s presidency, work has already begun on a post-Brexit US-UK trade deal, while Biden has previously shown disdain for Johnson, describing him as a “physical and emotional clone” of Trump.
Corporate tax rates
Frank Barry, Professor of International Business and Economic Development at TCD, says it is “unlikely that there will be much of a difference between the two” presidencies, although regulation on tech giants will come from both men either way.
According to the corporate tax proposals leaked last year, Biden was talking about manipulating the margins of the new regime that Trump instituted in 2017.
But what’s amazing about the Trump regime is that it went against what Republicans have been advocating for decades. He addressed many aspects of the Democratic Party’s proposals, that is, trying to reconfigure America’s corporate tax system to reduce incentives to [US companies] to invest abroad.
“That was the political platform that Obama used in his first presidential campaign. “
Even more significant, says Professor Barry, was that US multinationals that went abroad would no longer get residual tax liabilities to the US treasury on the profits they made abroad. Complex clauses were introduced to reduce the incentives to do so.
“The kind of complex package that Trump presented is really spectacular, and Biden is talking about manipulating the margins of that.
I think if the Democrats come back to power, they will raise corporate tax rates a bit because Trump’s was an absolute gift to corporations.
Pharmaceutical companies
Earlier this year, Trump participated in a two-hour ‘town hall’ meeting as part of the launch of his presidential campaign. During this, Trump was asked about the possibility of bringing drug manufacturers back to the US during a discussion about a Covid-19 vaccine.
As part of his response, he said: “It is not just China. Take a look at Ireland, they make our drugs. We all make our drugs except us. “
He added: “We are recovering the entire supply chain. Nobody has to tell me to do it, I’ve been talking about it for years. “
Ireland’s pharmaceutical industry has grown steadily – between 2012 and 2018, pharmaceuticals have become Ireland’s largest export to the US This has only become more apparent during the pandemic and subsequent recession, when Ireland’s pharmaceutical exports increased, reinforcing a previously gloomy economic forecast for this year.
Now, Trump is saying that he will attract these Irish-based American drug companies.
“So Trump inserts his impromptu remarks into his speeches from time to time about bringing Irish drug companies to America,” says Barry.
Well, again, his chance to do so was in the Tax Cuts and Jobs Act of 2017, the great corporate tax bill.
And all the complex and intricate sub-clauses of that bill were designed so as not to force companies to do that.
“There is an important clause in the bill called the ‘GILTI’ clause – Global Intangible Low Tax Income – and it’s almost like a global minimum tax, the specific numbers that were used in the GILTI clause allow Ireland to slip under the radar, you could say, to allow our tax regime not to fall into that trap. “
Regulate technology companies
On the possibility that tech companies could be regulated more heavily in the next US presidential term, Barry says this is another “real conundrum” for Democrats, who are more “populist” in the sense that they defend the individual against large corporations. .
But the problem they find themselves in is that Silicon Valley is, almost to one person, a Democrat.
In the same way that Trump and the Republicans have somehow found themselves in debt to the drug companies, which tend to be pro-Republican, the tech companies are all pro-Democrat.
He adds that whichever party takes power, there will be pressure to control tech companies with some form of antitrust regulation, but it will be particularly difficult for Democrats.
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On a global front, Biden can be a better ally for technology companies.
Barry says the battle between the OECD is between Europe and the United States to tax tech companies based on European proposals, which the US side considers anti-American and protectionist, since all the major tech companies are US companies.
I think that a Biden presidency would be strong to defend American interests against a digital tax that has been pushed by large European countries.
Biden’s proposals leaked
Barry says there was another tax proposal that was of interest and could be devastating for Ireland and its relationships with multinationals.
“Part of the leaked Biden proposals was essentially to impose a minimum tax on American multinational companies abroad, that’s what the GILTI clause does.
“But that minimum tax applies to all taxes they pay abroad.
So Apple, for example, if you operate in Germany and you pay individual taxes, you operate here, you pay taxes if you are in Bermuda or wherever you pay taxes, all those taxes add up. And if they don’t add to the minimum tax in this GILTI clause, then they owe a specific amount of money to US income.
Now, Biden’s proposal says that instead of calculating the minimum tax applicable to these companies abroad, they should be calculated as a minimum tax per location. So that would really hurt us.
“So, for example, if a multinational is in Ireland, it has to pay, say, 14%. And that would mean that our 12.5% means nothing. It is now up to a low of 14%.
“The current situation is that multinationals can essentially ‘mix’ the tax they pay in a high tax jurisdiction with the tax they pay in a low tax jurisdiction like Ireland, and that’s what they have to balance with the tax clause. US minimum.
“That is one of the great battles in the legal battle with the OECD: whether a minimum tax should be applied per jurisdiction, which will be very damaging for us, or per company, which seems to make the most sense, and [under] that we can function well. “
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