Bruton: Ireland promotes good business practice

Friday 25 July 2014 21.51
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Minister Bruton was reacting to comments made by President Obama about Ireland's tax practices
Minister Bruton was reacting to comments made by President Obama about Ireland's tax practices
Barack Obama said US businesses who relocate in Ireland are 'gaming the system'
Barack Obama said US businesses who relocate in Ireland are 'gaming the system'

Minister for Jobs, Enterprise and Innovation Richard Bruton has said that the Government does not promote or encourage companies to engage in any practices, which bring little or no substance in terms of jobs or economic activity to Ireland.

Mr Burton was speaking after President Obama criticised US companies, which he said were exploiting a legal loophole to reduce the taxes they pay.

Mr Bruton said that the solution lay in the United States and he said, he did not think there would be any loss to Ireland if there were changes to US laws.

In an interview on CNBC, Mr Obama said businesses who relocate their headquarters to countries with lower tax rates, such as Ireland, are "gaming the system".

He said that US companies were locating in Ireland with a small number of employees to avail of the low tax rate, while employing thousands of people in the US.

Full CNBC interview with Barack Obama

Mr Obama said: "Keep in mind that what we're trying to do is to say that if you simply acquire a small company in Ireland or some other country to take advantage of the low tax rate, you start saying we're now magically an Irish company, despite the fact that you may only have 100 employees there.

"And you've got 10,000 employees in the United States. You're just gaming the system."

Mr Obama said these companies were also benefiting from being US companies.

He said that although the practice might be legal it does not necessarily mean it is the right thing to do for the country.

"People are paid to maximise profits. But people are also paid to be good corporate citizens," he said.

"They're also paid to make sure that they're thinking about, in addition to shareholder value, how do you grow a company over the long term.

"And this kind of strategy, I think, undermines people's confidence in how companies are thinking about their responsibilities to the country as a whole," Mr Obama added.

During another speech at the Los Angeles Technical-Trade College, he said such companies were "technically renouncing their American citizenship" and could be described as "corporate deserters".

He said he intended closing the loophole in the US tax code, which permitted companies to locate abroad.

Financial and business authorities in Ireland have been responding to the criticism.

The Department of Finance said its understanding was that tax regimes in other jurisdictions, rather than in Ireland, were at issue.

The department said, however, that it was examining whether or not there were ways to discourage transactions that may not involve real substance in terms of jobs and investment in the Irish economy, while being careful not to damage legitimate Irish business activity in the process.

IDA Ireland Chief Executive Barry O'Leary said the agency is not in favour of inversions that take place that do not lead to substantial activity in Ireland.

He said some companies that have "inverted" into Ireland have well over 1,000 people here.

Mr O'Leary said they are US companies that take care of the whole European market from Ireland.

However, he said the ones that have "very little substance" are causing the reputational problem, when they come to Ireland to avail of the tax rate without putting a significant presence on the ground.

Mr O'Leary also said that it is not just an Irish thing, he said companies also "invert" to get a base in the UK and Switzerland. 

Minister of State at the Department of Finance Simon Harris said the exploitation of a legal loophole by US companies to reduce the taxes they pay is an issue for the US authorities.

He told RTE's News at One that the reality of the situation is that inversions are occurring as a result of  an anomaly in us tax code.

He said the Government is prepared to do whatever it can to assist US authorities, but action needs to be taken by them.

Minister Harris said the subject of President Obama's comments has already been discussed between Irish and the US authorities. 

Keywords: obama, tax, cnbc