Monday, July 2, 2018
IMF, The Impact of International Tax Reform on Ireland, in Ireland: Selected Issues 18-44 (June 2018):
1. Over the last two decades, the Irish stock of inbound foreign direct investment (FDI) has risen dramatically from roughly 60 percent of GDP to 275 percent (Figure 1). Several features of Ireland’s economy, including a skilled, English-speaking workforce, membership in the European Union (EU), and a probusiness institutional environment, help attract investment. In addition, Ireland’s relatively low and stable corporate income tax (CIT) rate on active trading income has played a key role in attracting foreign capital.
2. Recent international tax reforms are putting pressure on the international tax system from which Ireland has benefitted. Specifically, the Global Forum on Tax Transparency and the OECD/G-20 Base Erosion and Profit Shifting (BEPS) project are encouraging greater disclosure by corporations, tax administrations, tax planners and financial institutions as well as adoption of anti-abuse measures by governments in order to combat cross-border tax avoidance strategies. Ireland has been an active participant in these fora. The EU adoption of the Anti-Tax Avoidance Directives (ATAD, 2016–17) puts it in the vanguard of countries implementing BEPS recommendations. And the U.S. “Tax Cuts and Jobs Act” (TCJA) of 2017, which slashed the U.S. CIT rate from 35 percent to 21 percent, among other measures, substantially improved the international tax competitiveness for U.S. investment. Looking forward, OECD/EU initiatives on taxing the digital economy and the EU’s common consolidated corporate tax base (CCCTB) may—if adopted—put further pressure on Ireland’s corporate tax base. The purpose of this paper is to examine the impact of these reforms—and the U.S. tax reform in particular—on Ireland’s economy and fiscal resources.