U.S. corporate income tax cuts: Spillovers to the Irish economy

We examine the potential spillovers to the Irish economy from the recent U.S. corporate income tax cuts. We find that a 15-percentage point cut in the U.S. corporate income tax rate has little effect on Irish economic... [ view full abstract ]

We examine the potential spillovers to the Irish economy from the recent U.S. corporate income tax cuts. We find that a 15-percentage point cut in the U.S. corporate income tax rate has little effect on Irish economic activity, with an increase in GDP of less than 0.1%. We also examine the impact of the U.S. corporate income tax cut on investment- and profit-shifting behaviour in Ireland. We find that the tax cut could lead to a reduction in FDI inflows and increase FDI and profit outflows by close to €17.5 billion, or 6% of GDP. To the extent that the onshoring of intellectual property assets has artificially inflated Irish GDP in recent years, such a downward level adjustment may have little relevance for Ireland's underlying economic activity.