US investment in Ireland declined by €45bn ($51bn) in 2017, in another sign that sweeping tax reforms introduced by US president Donald Trump have impacted the decisions of American multinational companies.
The withdrawal of US investment, combined with a €16bn drop in UK-based investment, meant that Ireland saw a steep €54bn decline in foreign direct investment (FDI) last year, data released on Thursday shows.
Economists have been warning that both the UK’s impending departure from the EU and Trump’s overhaul of the US tax code, which aimed to reduce the use of foreign low-tax jurisdictions by US companies, would dent inward investment in Ireland.
“The fall in US foreign direct investment is clearly caused by uncertainty around US tax reforms and by uncertainty around the precise form Brexit will take,” said Stephen Kinsella, an economist at Ireland’s University of Limerick. “Investors concerned by either, or looking to benefit from either, would keep their powder dry and their money at home.”
While the reforms were only introduced in December 2017, the change to the minimum rate of effective tax on payments between US corporations and foreign subsidiaries had long been mooted by the Trump administration.
In November 2017, Trump went so far as to single out Ireland, saying it was one of several countries that corporations used to offshore profits.
“For too long our tax code has incentivised companies to leave our country in search of lower tax rates. It happens—many, many companies. They’re going to Ireland. They’re going all over,” he said.
Figures released by the US treasury department in August revealed that Irish-based entities saw a dramatic decline in their holdings of US treasuries, as did those from several other low-tax jurisdictions. Ireland had been the third-biggest holder of US treasuries, after China and Japan.
Irish tax laws have been under significant international scrutiny for several years. In 2014, the country’s government moved to close a loophole that gave rise to a tax avoidance structure known as the “double Irish,” which allowed companies to transfer income to Caribbean tax havens.
In June, the Irish finance ministry was forced to rebuff a study that claimed Ireland was the world’s biggest tax haven. And in September, Ireland collected €14.3bn ($16.4bn) in unpaid taxes and interest payments from Apple (AAPL), following a 2016 European Union ruling that said tax benefits provided to the company amounted to illegal state aid.
While 2016 saw a much sharper decline—of €123bn ($140bn)—in US investment in Ireland, it was offset by increased investment from Europe.
Meanwhile, outward investment by Irish-owned companies in 2017 decreased by €96bn, to €717bn.