25-05-2025
John Whelan: Ireland's investors in the US under siege
US president Donald Trump has just opened a new front in his rush to grab a slice of the earnings of foreign companies, now targeting those already located in the US.
The landmark tax bill, passed by the House of Representatives last Thursday, features the administration's key economic and political priorities with a hefty section dedicated to 'remedies' against 'unfair foreign taxes'.
The bill considered the 'most significant piece of legislation that will ever be signed in the history of our country' according to Trump writing on his Truth Social platform, has spooked foreign investors in the US.
Effectively, the bill seeks to scrap existing US tax treaties with other countries and introduce tax measures against foreign investors coming from countries that the US considers are implementing under-taxed profits rules.
The bill plans to raise levies on local subsidiaries owned by companies in countries that have adopted 'unfair' foreign taxes.
Analysis of government data by the US Tax Foundation stated that more than 80% of the current US FDI stock emanates from countries caught by the bill's retaliatory tax provisions.
Ireland with its low corporation tax is clearly in the target zone.
Irish companies will be impacted by tax provisions
And Irish companies such as Glanbia with more than 20 production facilities and several innovation centres across the US in locations including Chicago, Idaho, Michigan, and California, could feel the pain.
Glanbia and its shareholders, which generates a significant proportion of its €3.3bn revenue in US dollars, will be impacted by the significant tax provisions of the bill if passed by the Senate.
Currently, US tax treaties make dividend payments to parent companies abroad tax-free.
However, the 1,100-page bill, which will now move to the Senate, proposes hikes to withholding taxes (WHT) and other taxes on companies from countries that have adopted the undertaxed profits rule (UTPR) within the 15% global corporate minimum tax framework, as well as digital services taxes or so-called diverted profits taxes.
Ireland has implemented the 15% global corporation tax which is clearly targeted by the bill, but fortunately has not implemented the digital services tax, which many EU countries have.
However, Irish companies are among the biggest foreign entities investing in the US economy, both in terms of the amount of investment and the number of jobs they create and will be among the most impacted globally by the bill, if implemented as Trump intends.
Estimates by the bipartisan US Joint Committee on Taxation suggest the retaliatory taxes would raise $116bn in revenues over 10 years but would drop off after 2033.
Jonathan Samford, CEO and president of Global Business Alliance, noted this is because foreign subsidiaries would be 'forced to scale back their US operations'.
The bill proposes increasing WHT on dividends to foreign parent companies by 5% each year up to a maximum of 50%.
And apply the same increases for corporate taxes on the so-called 'effectively connected income' (income earned by a foreign entity that is connected with its business in the US) up to a maximum of 41%.
The profile of Irish companies operating in the US is hugely varied and includes many industries such as food and retail, building materials, technology, and financial services, to name a few.
The size and scale of Irish organisations with a footprint in the US also vary, from emerging start-ups just beginning to establish a foothold to large, well-established and mature multinationals.
Larger Irish-owned companies such as Glen Dimplex, Orna, Kerry Group, Kingspan as well as Glanbia will be the first to be impacted.
The US government's goal is to convince foreign governments to rethink their implementation of their allegedly unfair taxes.
'Investors from foreign countries are being subject to additional tax in the US in an effort to encourage the investors' home country to change their law with respect to UTPRs and digital service taxes which some lawmakers view as penalising US companies,' said Jason Smyczek, principal of international tax at Deloitte in Washington DC.
The bill, passed last Thursday by the US House of Representatives, now has to go forward to the Senate, where ultimate responsibility lies.
Given the hold that Trump's Republican party has in the Senate, it is likely to be passed into law, but there may be some amendments, which may soften the blow for Irish and international companies located there.
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