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IRELAND: Risks From Potential US Tariffs - Corporate Tax Vulnerability (1/3)

IRELAND
CEEMEAEurozoneBulletMarketsFixed Income BulletsForeign Exchange BulletsIreland

US President Donald Trump has signalled aggressive measures to take action on corporation taxation, which is increasingly worrying for Ireland given its dependence on multinational firms for tax receipts.

  • Trump signed an executive order effectively pulling the US out of the Organisation for Economic Co-operation and Development (OECD) corporate tax agreement of a global corporate tax rate of 15% on firm revenues over E750mln, and making threats about the taxation of US multinationals if other countries take measures which disproportionately affect US companies.
  • If this goes ahead, Irish corporate tax receipts are vulnerable - the top 10 multinationals account for around over half of corporation tax receipts (according to a revenue report the top 10 in 2023 accounted for 52% of CT receipts, slightly down from 57% in 2022). If any of these firms relocate it could significantly affect receipts.
  • On top of this, Tánaiste (Deputy PM) Simon Harris recently highlighted “If three US companies left Ireland it could cost us [the Irish economy] E10bn in corporation tax." This E10bn loss would represent around 25% of 2024 corporate tax receipts, though would be even higher excluding the Court of Justice of the European Union (CJEU) ruling payment of around E11bn in 2024 (around 36%). (Note: A CJEU ruling in 2024 that two Irish subsidiaries of the Apple group received unlawful state aid from Ireland, and therefore Ireland was ordered to recover a total of E14bn back in taxes from Apple).
  • Important to note however, in order for this sizeable loss to occur the three largest corporate tax-contributing multinational companies operating in Ireland would have to leave Ireland rather than any three.
  • Even so, there is a significant concentration risk highlighted by over half of corporate tax receipts coming from just 10 companies.
  • Whilst tax changes could attract firms back to the US, other practicalities have to be considered such as the ease to move factories, plants and infrastructure though this may be less relevant for companies domiciled in Ireland. In 2023, the manufacturing sector accounted for 38% of corporate tax receipts, followed by ICT (17%) and finance & insurance was the third largest contributing sector at 15%. 
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US President Donald Trump has signalled aggressive measures to take action on corporation taxation, which is increasingly worrying for Ireland given its dependence on multinational firms for tax receipts.

  • Trump signed an executive order effectively pulling the US out of the Organisation for Economic Co-operation and Development (OECD) corporate tax agreement of a global corporate tax rate of 15% on firm revenues over E750mln, and making threats about the taxation of US multinationals if other countries take measures which disproportionately affect US companies.
  • If this goes ahead, Irish corporate tax receipts are vulnerable - the top 10 multinationals account for around over half of corporation tax receipts (according to a revenue report the top 10 in 2023 accounted for 52% of CT receipts, slightly down from 57% in 2022). If any of these firms relocate it could significantly affect receipts.
  • On top of this, Tánaiste (Deputy PM) Simon Harris recently highlighted “If three US companies left Ireland it could cost us [the Irish economy] E10bn in corporation tax." This E10bn loss would represent around 25% of 2024 corporate tax receipts, though would be even higher excluding the Court of Justice of the European Union (CJEU) ruling payment of around E11bn in 2024 (around 36%). (Note: A CJEU ruling in 2024 that two Irish subsidiaries of the Apple group received unlawful state aid from Ireland, and therefore Ireland was ordered to recover a total of E14bn back in taxes from Apple).
  • Important to note however, in order for this sizeable loss to occur the three largest corporate tax-contributing multinational companies operating in Ireland would have to leave Ireland rather than any three.
  • Even so, there is a significant concentration risk highlighted by over half of corporate tax receipts coming from just 10 companies.
  • Whilst tax changes could attract firms back to the US, other practicalities have to be considered such as the ease to move factories, plants and infrastructure though this may be less relevant for companies domiciled in Ireland. In 2023, the manufacturing sector accounted for 38% of corporate tax receipts, followed by ICT (17%) and finance & insurance was the third largest contributing sector at 15%. 
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