DUBLIN, July 25 (Reuters) - Ireland defended its tax regime on Friday against criticism from U.S. President Barack Obama, insisting that it does not seek to entice U.S. companies to make the country its domicile to lower their tax bills.
Singling out Ireland for criticism, Obama on Thursday hammered U.S. companies that avoid federal taxes by shifting their tax domiciles overseas and called on Congress to pass a bill to curb such deals, known as “inversions”.
Investment from multinationals, whose employees account for some 10 percent of Ireland’s workforce, is a central plank of Irish economic policy and the head of the country’s investment agency has warned that inversions could damage its reputation.
“Ireland has a very robust strategy for attracting foreign companies who invest substantively, put real investment into the ground and provide employment,” enterprise minister Richard Bruton told reporters.
“That is very different from what has been discussed in recent days around tax inversions. Ireland does not promote such investments and nor do we want such investments. They actually cost us money and we derive no benefit from them.”
“Inversion” deals occur when a U.S. company acquires or sets up a foreign company, then moves its U.S. tax domicile to the foreign company and its lower-tax home country, most often Ireland, Britain, Switzerland or the Netherlands.
Inversions are still rare, but are becoming more common and deals like Medtronic Inc’s $42.9 billion takeover of Irish-domiciled Covidien led to a near six-fold rise in the value of Irish-based M&A in the first half of the year.
Bruton said Ireland derived no benefit from inversions and that it was an issue that needed to be fixed but could only be resolved by changes to the U.S. tax code.
Several Democrats have offered bills to curb inversions, calling for a rule change that would deem any company with half of its business in the United States to be U.S.-domiciled.
But no new law is likely to result as long as Republicans contend that inversion rules need to be part of a broader overhaul of the tax code, policy analysts say. (Reporting by Padraic Halpin; Editing by Ruth Pitchford)