IDA Ireland: Low corporate tax rate here to stay, ‘difficult’ to say same for US

By Flora Southey

- Last updated on GMT

The Republic of Ireland’s competitive corporate tax rate represents a ‘stability’ that may not be found in other economies, says IDA Ireland executive.

Ireland’s low corporate tax rate of 12.5% has helped attract​ foreign investment over the past 20 years, with significant interest observed across pharmaceutical, biotech, and life science services sectors.

This year alone has seen biopharmaceutical-focused WuXi Biologics​, ABEC​, AbbVie​ and Merck & Co.​ announce major investments in the Green Isle.

While the passing of the US Tax Cut and Jobs Act​ in December last year – which decreased the US corporate tax rate from 35% to 21% – has increased global competitiveness, Ireland’s Industry Development Authority (IDA) executive Patrick McGee said the US policy’s ‘stability’ was less certain.

“The Irish corporate tax policy has been really one of the pillars of Irish economic policy,” ​said McGee.

“We are a small economy in the European sense. Our neighbours are the UK and France – which are much larger economies – so [the corporate tax rate] was a way to balance the playing field in terms of investment,” ​he told us.

Numerous Irish governments – over a period of 20 years – have maintained this policy, which represents a ‘stability’ that may not be found in other economies, said McGee.

“[The maintained 12.5%] is not just the number; it’s the stability, and knowing that [the rate] is going to be the future in terms of tax policy as well.”

“It’s probably difficult to say the same for the US tax policy,” ​he said. “It may change with the next administration, it may not.”

McGee – who is based in the US – said he still sees a lot of interest in Ireland from foreign decision makers: “[The US reform] is not a ‘threat’ as such, but it has made it more competitive for sure.”

However, while Ireland’s tax rate is more competitive than it was 30 years ago, McGee said the current tax policy does not “necessarily impact [Ireland] hugely.

“Tax is a piece of that decision making process, but it doesn’t drive the decision making process.

“Companies still realise that they need to invest internationally, if they want to do business internationally,” ​he said.

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