BRUSSELS / PARIS (Reuters) - Europe may attract a few disgruntled American firms looking for lower corporate tax as the United States plans a crackdown on tax avoidance but a major wave of company relocations in either direction looks unlikely as other factors weigh.

President Barack Obama plans to tighten rules allowing companies to defer paying taxes on profits made overseas as long as those earnings are ploughed back into the foreign subsidiaries.

Cash-strapped governments are looking at better ways of boosting income, with cracking down on tax cheats or avoidance shooting up the priority list.

Two European Union countries with low corporate tax rates, Ireland and the Netherlands, were singled out with Bermuda as accounting for a third of all foreign profits at US companies in 2003.

With US company earnings taxed at 35 percent, some lawyers accuse Obama of simply trying to thwart healthy tax competition from countries like Ireland where the rate is 12.5 percent.

Obama plans to tighten the deferral rule by prohibiting firms from taking deductions on the expenses for their overseas operations until they have booked their profits in the United States, part of a strategy to make it less worthwhile to export jobs.

The impact on the EU will hinge on whether Obama's plans make it through Congress intact, how they are applied and the ingenuity of US companies to keep tax bills down, lawyers said.

"My understanding is that it would hit countries. There are countries with low tax rates that have been particularly used by US multinationals to put their profits in. It looks like it is a way of dealing with that," said Professor Michael Devereux, director of the Centre for Business Taxation at Oxford University.

"That will clearly make the US a less attractive place to be headquartered relative to other countries. They may come to Europe, they may go to other places. There is no particular reason why they should be in Europe," Devereux said.

Irish and Dutch commentators say the impact of Obama's plans may not necessarily be what he intends.

The number of "letter box" companies registered by foreign companies in the Netherlands is over 20,000 and official figures show 4,700 billion euros flow through them, some seven times more than the Dutch gross domestic product.

"I think Obama has a point when he says multinationals are abusing the tax treaties of the Netherlands by avoiding taxes elsewhere in the world," said Albert Hollander, head of the Dutch branch of Tax Justice Network, a think tank.

"But it must be dealt with on an international level. You can't ask one country to step down as another country will step into its place," Hollander said.

The US is seen as going out on a limb as most European countries — with Britain set to follow suit — exempt foreign income and only tax incomes within their own country.

"I just don't think it will hit the target he wants. It's just moving the goalposts. What we need to bear in mind is that at the end of the day, corporate tax is a cost that is going to be passed on to the end consumer. It's not going to be beneficial in the long term to the United States," said Chas Roy-Chowdhury, head of taxation at accounting association ACCA.

Hollander said the shell-company "letter boxes" will shift from some of the low tax EU countries but research showed that tax was not the top issue that shaped decisions on company locations.

Infrastructure and education levels mattered more, he said.

"Letter boxes will move but it's just creating more business for consultants. Companies will find some other way," Hollander said.

Initial Irish reaction was also sanguine.

"We're not overly concerned, we did expect deferral could have been under greater attack," said Barry O'Leary, chief executive of Ireland's Industrial Development Agency.

A big exodus of US companies from the United States appears unlikely as companies would think twice about weakening their position in the world's biggest economy and stock market.

Similarly, Bill Dodwell, head of UK tax policy at consultancy Deloitte believes US companies will continue to invest in Ireland, the Netherlands and other low tax countries to reap comparative advantages.

"What it may do is it may make some of those foreign investments less advantageous overall so it may be, if you're looking to build a new research centre, would you build it in Europe or would you build it in the United States and it may make it more attractive to build it in the United States," Dodwell said.

"I think that it would be surprising to find Microsoft or whoever looking to relocate their headquarters out of the United States," Dodwell said.