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The Ireland-U.S. Council 2021 President's Report

Tom Higgins - Ireland US Council President
Tom Higgins
President
The Ireland-U.S. Council
& Executive Vice-President, Fiserv Inc.

In this President’s Report for 2021, I am happy to be writing to the members and friends of our Ireland-U.S. Council family. We are pleased to tell you that we have been able to navigate the treacherous shoals into which we were driven by the extraordinary times of the Covid Pandemic. We were able to find our way through this difficult time with some success because of the generous support and important assistance from our Council members and friends in the United States and in Ireland.

It is gratifying to also report to you that we have emerged through these challenging days and have now arrived at the doorstep of re-commencing our in-person event programming schedule as we reach the fourth quarter of the 2021 Calendar year. And we are poised to start our 2022 full-year platform of in-person events programming schedule. All the elements of our in-person events schedule that we have planned are so vital and essential in maintaining the integrity of the Ireland-U.S. Council’s mission objectives.

We plan to kick-start this event programming with our 58th Annual Dinner on Friday, November 5 in New York, followed by our Ireland-U.S. Council Gala Dinner in Dublin Castle one month later on Friday, December 3. These two occasions are planned as the twin relaunching pads for the full return to our complete in-person events programming platform.

The last time your Council hosted an in-person event activity was at our Winter Meeting in Palm Beach in February 2020. Thus, a full 21 months have elapsed and a total of fifteen (15) of our in-person events have been suspended because of the dangerous Covid virus outbreak. During this extraordinary time, we have witnessed distressing events that have disrupted and, in some cases, upended the lives of countless millions of people and businesses in America and in Ireland, and around the globe.

We have arrived now through this time of disruption to be able to join again in person to celebrate our Ireland-U.S. Council mission at our 58th Annual Dinner at our home away from home in The Metropolitan Club in New York City. We are so pleased to be here now and to have emerged, bruised but surely unbowed, from the challenge of the shutdown caused by this extraordinary pandemic.

Ireland- U.S. Economic Relations

As I have mentioned, almost two years have passed since we have been able to gather in person at an Ireland-U.S. Council event. We know that the Covid-induced partial economic shutdown damaged many businesses, hobbled myriad enterprises and generally caused great economic disruption. But, we also now are hearing many stories of the sure, certain and perceptible comeback and recovery being made as we move back toward pre-covid (and more normal) economic conditions.

Let’s look at Ireland’s export performance to get an idea of how things are going. The value of goods exports from Ireland hit a record $190 billion last year despite the global economic slump caused by Covid, fueled by a surge in exports of medical and pharmaceutical products. The value of pharma exports rocketed by 25 per cent to $72 billion last year, accounting for 39 per cent of all Irish goods exports in 2020.

Ireland is now a significant global hub for pharma and medtech, playing host to 24 of the top 25 biggest (mostly American) players, including Pfizer, Johnson & Johnson, Roche, Medtronic and AbbVie. These companies have been ramping up production to meet soaring demand for medicines and products connected with the treatment of Covid-19.

This has resulted in Ireland now scoring a record trade surplus of $87 billion for 2020. The U.S. was Ireland’s the largest export destination last year, accounting for $58 billion or 31 per cent of the country’s total exports.

Global Minimum Corporate Tax Rate

An old economics rubric says that capital goes where capital is treated well. Everyone knows that an attractive investment environment for business comprises many issues. And one of the key factors is taxation. For over seven decades Ireland has led the world in shaping an attractive and well-thought-out program of corporation tax that has enjoyed wide political and popular support within the country for over three quarters of a century.

Many of Ireland’s past leaders, some of them prime movers in the War of Independence one hundred years ago, decided on a strategy that was clearly modeled on the American economic success story of generating growth through private sector investment. The cornerstone of that policy was the fundamental right to private ownership of property. It was rooted in a multi-generational commitment and a foundational belief in free enterprise that sat comfortably with State involvement in business where private sector investment was lacking. These leaders, Eamon DeValera (himself born in New York), W.T. Cosgrave, Seán Lemass and many others led the drive to build an economy in Ireland that would be one characterized by emigration-ending fast economic growth with completely open and free trade. Today, Ireland is the most open free-trading economy in the world.

Ireland’s favorable low-tax policy has had many overseas admirers, copycats, and critics. In this latter group we have a motley collection of big-government lovers, social justice advocates and competitor nations, among others, who have been putting pressure on Ireland to drop its low corporate tax rate.

There has been a succession of candidates in this club like the European Union, the current Biden Administration in the U.S. and the OECD. The most recent iteration pushed by the OECD drew lots of international attention in the last few weeks. This Paris-based outfit representing 38 nations, has been engaged in serious efforts to force Ireland into a deal to hike its low rate of 12.5% corporation profits tax.

In our view, a superb performance has been delivered by Ireland’s Minister for Finance, Paschal Donohoe, who has been a steady hand on the wheel for Ireland managing this process. He recently confirmed that Ireland has agreed to a corporation tax rate of 15%, an increase of 2.5%.

However, it’s not that simple. As we peer into the weeds in this deal there are some important things to note. First, after months of negotiation (some would say bullying) Ireland won significant concessions in the language of the deal before signing on. Some of the highlights here are that the global reform of the international tax regime proposed won’t kick in for some years – right now it looks like maybe 2023 but could be years later than that. Also, it will only apply to companies with annual revenues exceeding $750 million.

While acknowledging the significant change under the agreement, Minister Donohoe commented that Ireland “will remain an attractive location for investment” and will continue to play to its strengths, “centered on a highly-educated and dynamic workforce that has consistently delivered innovation and profitability over many decades to businesses that have made Ireland their home.”

This deal is welcome in that it now puts an end to this stage of the pressure on Ireland to change its tax laws. It will provide a high degree of certainty for Ireland’s corporation tax arrangements. Not least, it will copper-fasten Ireland’s ability to keep a 12.5% corporation tax rate for smaller businesses. Ireland’s commitment to the deal will ensure it continues to be regarded as an active and engaged participant in the global tax community and continues to input on the proposed future international tax changes.

Next up – keeping an eagle eye on the dynamic and evolving situation in the Washington DC drama of U.S. tax reform changes and their likely impact on Ireland. As currently mooted, corporation tax in the United States would increase if these measures passed into law. This would clearly make Ireland’s tax offering more attractive to fast-growing American companies.

Remember Those Headlines about Apple’s Ireland Tax Bill?

Yes, back in 2016 there were massive media headlines saying Apple owed Ireland a king’s ransom amount of money. Remember them? The Brussels bureaucracy aka the European Union had decreed in a ruling that Apple owed Ireland a huge $15 billion in back taxes – they alleged the Government in Ireland had given the company illegal tax breaks.

Fast-forward to 2020 (yes it takes a long time to appeal stuff in Europe) and lo and behold that ruling was overturned by the European Court. Apple and the Government of Ireland had both appealed the ruling. Ireland’s Government in a statement said they had appealed the 2016 mandate because “it had always been clear Apple received no special treatment. The correct amount of Irish tax was charged ... in line with normal Irish taxation rules.”

Apple have had their HQ for Europe, Middle East & Africa, in Cork since 1980 when it started with 60 employees. Today Ireland is home to more than 6,000 Apple employees and a sprawling campus in the city of Cork. Apple has celebrated over 40 years operating in Ireland, the original manufacturing facility has expanded and is now part of a campus that includes AppleCare, Operations, Logistics, and a variety of other teams..

Is Ireland A Tax Haven?

All of the emphasis on Ireland’s corporation tax policy has fueled a debate about whether Ireland is tax haven. So, let’s refer to the above-mentioned OECD which has relied on its definition of a tax haven which it promoted a quarter of a century ago. It is still the gold standard definition. It uses four criteria to determine tax haven status:
  • nominal or zero taxes (and offering non-residents tax-avoidance opportunities)
  • lack of transparency
  • an unwillingness to exchange information with OECD states’ tax authorities
  • no requirement for substantial business activity.

By these standards, the answer is clear – Ireland is no tax haven. Ireland’s Government firmly rejects the notion that the country is a tax haven. Our imagination colorfully conjures up images of Caribbean island palm trees and hot sun with lots of brass-plate corporate registrations. All backed up by virtually no on-the-ground employment or economic activity to add value. Clearly, by any stretch of even a fertile imagination, Ireland cannot be put into that category.

Brexit

So how has Brexit affected Ireland so far? It’s not a very easy question to answer. The physical land border issue has always been the thorn in the Brexit matter – sticking out like a sore thumb. Ireland is the only place where the United Kingdom shares a land border with the European Union.

The European Union and the United States have made it clear that fresh trade agreements with the United Kingdom post-Brexit will be impossible if physical border controls are re-imposed on the island of Ireland, imperiling the Good Friday Agreement. And so far there appears to be no real threat that border posts on the island of Ireland will ever re-appear.

The big fear has been that Ireland’s companies selling into Britain will face tariff, quota or red-tape complications that will hamper and disrupt trade. So, has this happened? The supply chain disruptions caused by Covid not just in Ireland but around the world have cast a fog over this. It is unclear the extent to which Brexit or Covid is the real disruptor here. Clearly, disruption has occurred, but it does appear that Brexit is not the principal culprit. We keep our eyes on this one.

New Europe Plan To Ease Brexit Burden on Northern Ireland

We were also heartened by the latest European Union plan of a few weeks ago which will see a reduction of post-Brexit checks on goods and medicines arriving into Northern Ireland from the rest of the UK. Northern Ireland has a special Brexit deal which keeps it in the EU’s single market for goods and allows free-flowing trade with the EU.

The new plan, which seeks to calm a long-running dispute over a key part of the Brexit agreement, would remove about 80% of spot checks for Northern Ireland. According to Brussels, customs paperwork would also be cut by 50% for Northern Ireland companies. At the start of the year, the new post-Brexit arrangement - known as the Northern Ireland Protocol - was introduced to help prevent checks along the border between Northern Ireland and the Republic of Ireland. While this keeps Northern Ireland in the EU’s single market for goods it does create, according to Unionists, a new trade border with Great Britain which, they say, undermines their place in the UK.

Europe’s latest proposal would have several effects on Northern Ireland:

  • Most food products will not need to be physically checked when arriving into Northern Ireland from Great Britain
  • A cut to the required administration for Northern Ireland importers
  • Expanded trusted trader arrangements meaning more products and companies are exempt from customs tariffs
  • Change to current laws to ensure no disruption to moving medicines across the Irish Sea
  • Improved engagement with stakeholders in Northern Ireland including politicians and business groups

Covid Travel Restrictions

There has been palpable and barely concealed disappointment in Europe that the United States did not relax sooner its travel restrictions on Europeans wishing to visit America. The White House announced on September 20 that in “early November” the U.S. will reopen to fully-vaccinated air travelers from most of Europe, including Ireland.

The relaxed rules, unfortunately, did not come in time for many of our Ireland-U.S. Council members in Ireland who had wished to attend our Annual Meeting of members and directors. In recent days, the White House belatedly announced that the restrictions would be raised on November 8, 2021 – yes too late for our many Ireland-based members who wished to be with us in New York.

Council Membership

We seek and welcome new members in our Ireland-U.S. Council family for our mission and activities on both sides of the Atlantic. As a membership organization, we are always eager to greet candidates for membership. We ask our existing members to assist in putting out the good word. Our Council mission is an attractive one. As economic relations grow and prosper between Ireland, north and south, and the United States, so too will the economic prosperity of the people on both sides of the Atlantic.

Our Thanks

The business conditions in both Ireland’s economy and in the United States and between our two countries have clearly improved despite the Covid challenges of the past 18 months. The outlook for the future shows great promise. Our mission is to enhance the business bonds and commercial connections between the United States and Ireland and our efforts are always aimed at ensuring that they continue to flourish.

We extend our thanks to all our members, supporters, sponsors, and friends in the United States and in Ireland for their participation and support of our programs and activities this past year. As we head into 2022 and beyond, it is our hope that you will assist us by sustaining your commitment to that tradition of support and loyalty.

Tom Higgins - Council President

Tom Higgins
President
The Ireland-U.S. Council
& Executive Vice-President, Fiserv Inc.
November 5, 2021
New York City



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