Ireland’s competitive advantage is set to be dismantled by Donald Trump’s economic agenda, a leading Irish economist has said.
Speaking to the at the Web Summit in Lisbon, Aidan Regan, professor of political economy at University College Dublin, said the president-elect has promised to incentivise industries to bring production back to the US, pledging to slash the corporate tax rate to Irish levels from its current rate of 21%.
“He said he would do it and I think he will,” said Mr Regan. “But the question is, will he create the incentive for companies to move real people back to the US as well as their intellectual property and intangible assets? I suspect he will.
“I think that is more of a worry for Ireland because, if just one or two big taxpayer companies in Ireland decide to shift their IP or assets back to the US, that could put a massive dent in Ireland’s finances.”
The rate of corporation tax paid in Ireland by large businesses is set to increase to 15%, in line with the Organisation for Economic Co-operation and Development’s goal to implement a global minimum corporation tax rate.
Multinationals have for decades flocked to Ireland to reap the benefits of its low corporation tax of 12.5%, English-speaking population, and educated workforce, leading to some of the largest companies in the world setting up their European bases here.
Currently, just three big US companies account for about one in every eight euro of total tax collected in Ireland, making the State extremely reliant on the operations of just a handful of multinationals.
However, pre-election promises by Trump could have wide-reaching impacts on Ireland’s fiscal success, with the president-elect ready to chip away at Ireland’s competitive advantage in a bid to bring US businesses back home.
Tax cuts are not the only tool in Trump’s economic playbook. While Ireland remains bound to EU competition law and with the verdict of the Apple tax case still fresh on everyone’s mind, the State can do very little to counteract Trump’s pitch to big businesses.
“I think it’s safe to say that Trump will generate a narrative for these companies, telling them that they were founded here, developed in the US, and that they should be employing people back home,” said Mr Regan.
“He won’t frame it that they should be paying tax here because he attaches value to people who actually do not pay tax.
“Trump wants companies to locate themselves physically in the US to employ people and create jobs.
Mr Regan explained that Trump can do what nobody in the EU is able to do, which is sit down face-to-face with company CEOs and offer a tax arrangement that suits them.
“That is what is different about Trump. He can say: ‘I’m giving you, specifically you, a special arrangement, one that will not break US competition law.’
“It could even end up with Trump operating on a company-by-company basis. That is the sort of transactional nature of him and his team.”
Pledging a protectionist, pro-American economic policy, Trump has taken aim at Ireland, who in his mind has taken what is rightfully theirs.
With more power to convince and a larger bag of tricks, Trump’s win in the 2024 election has clouded Ireland’s forward-looking strategies, catapulting it back into a world of uncertainty.