On St. Patrick’s Day, everyone wanted to be Irish for the day.
If Irish Finance Minister Michael Noonan had his way, foreign executives would be Irish every day. Under Noonan’s controversial Special Assignee Relief Programme and the Foreign Earnings Deduction, certain multinational employees who take key jobs in Irish-based companies would receive a significant portion (30%) of their pay tax-free (for salaries of up to $700,000). The exemption would apply to those who commit to staying in the country for between one and five years.
Also under consideration? Travel incentives which would allow foreign executives a tax break on the “reasonable cost” of a return trip from their home country to Ireland for themselves, a spouse or partner, and a child.
The plan is to try and lure foreign executives – and thus, foreign investment – into the country. The measure is not particularly popular at a time when high tax rates (up to 52%) and financial worries over continued unemployment and significant debt plague the country.
Noonan defended the program, noting that there is a similar plan in the Netherlands. He said about the tax incentives, “It is not a full tax break. It is worth trying out.” He went on to say that it was “another piece of originality which will make the Irish package for attracting foreign investment into the country more attractive”.
It’s already pretty attractive for U.S. companies who have realized that they can pretend to be headquartered set up shop in Ireland in order to avoid U.S. tax – and benefit from Ireland’s relatively low corporate tax rates. Ireland has, over the years, made overtures to many U.S. companies in an effort to woo them to the Emerald Isle. In 2009, those efforts landed the country on President Obama’s list of tax havens. At the time, the U.S. made noise about cracking down on multinational corporations who set up shop elsewhere in an effort to avoid US taxation. The White House noted that:
Nearly one-third of all foreign profits reported by U.S. corporations in 2003 came from just three small, low-tax countries: Bermuda, the Netherlands and Ireland.
Which companies were lured to the land of Guinness and Harp? Microsoft reportedly saved $500 million in US tax by relocating significant assets to a small shop in Dublin. Apple quickly followed in Microsoft’s footsteps. Other tech and pharmaceutical companies also took advantage of Ireland’s tax favored status hospitality, including Pfizer, Dell, and Wyeth.
The financial crisis in Ireland, though, may be making some of those companies nervous. The ongoing financial struggle in the country is thought to be one of the reasons that some of those companies (and by “some of those companies” I mean Apple) are seriously pushing Congress to cut them a break to repatriate monies to the U.S. This latest move by Noonan may be a desperate attempt to keep – rather than woo – foreign money.
The U.S. has walked an interesting line in its financial relationship with Ireland. On the one hand, we’re friends, right? This is the country that gave us great beer, amazing works of literature and music, soda bread, Pierce Brosnan (my mother is swooning now), Jonathan Rhys Meyers (now I’m swooning), and beautiful names (*clears throat*). But in an increasingly global economy – and a tough financial scene – the U.S. has become very aggressive with respect to cracking down on perceived tax havens. Will it continue to look the other way as Ireland pursues – some would say poaches – U.S. talent, and perhaps, more importantly, U.S. dollars? Or will the luck of the Irish run out?
(For more on the offshore tax haven crackdown, check back later today.)
