The Institute’s Annual Dinner 2022 took place on Thursday, 2 June at the Clayton Hotel, Burlington Road, Dublin.
Two years on from our last Annual Dinner, the Institute’s flagship event, it was wonderful to be back in the Clayton Hotel with 800 guests from Government departments, Revenue, State bodies, academia, the media and beyond. There was much to catch up on and a hum of chatter filled the hall as old friends and new colleagues came together for the first time since February 2020.
Our Guest of Honour was the Minister for Public Expenditure and Reform, Michael McGrath TD who addressed the room with reflections on this uncertain and challenging time in the world economy. Thank you to all who joined us for another memorable evening.
Irish Tax Institute President’s Annual Dinner 2022 Speech
Minister, Distinguished Guests, Ladies and Gentlemen.
It’s my privilege, as President to welcome you all here tonight. This is the first big event the Institute has hosted since our Annual Dinner in February 2020. And it’s great to be back.
I appreciate that this evening is a chance to catch up with colleagues and old friends, so my intention is, with your help and complete attention, to speak as efficiently as possible and to take up only a few minutes of your time.
I want to thank you, Minister McGrath for being our guest of honour tonight. And to congratulate you and your Government colleagues on your management of the pandemic and on your decisive action in support of business throughout the crisis.
I also want to congratulate Revenue for pivoting at such speed to implement the Government measures. As you know, Chairman, the Institute worked closely with your officials throughout the pandemic, and we are very grateful for your forbearance and understanding of the plight of businesses. And although us advisors enjoy disagreeing with Revenue, we equally enjoy the chance to collaborate effectively.
I want to acknowledge the significant progress the Tax Appeals Commission has made in reducing the backlog of cases under appeal. The Institute has engaged constructively with Commission Chairperson, Marie-Claire Maney since her appointment. And we look forward to working with her to try to alleviate congestion in the appeals system, perhaps by introducing an alternative dispute resolution mechanism.
So, I want to keep my comments to 3 key areas – Corporation Tax competitiveness, the Commission on Taxation and personal tax.
Starting with Corporation Tax – although the pandemic has waned, we are still surrounded by uncertainty in the global economy. Even as a self-proclaimed international tax nerd, the pace of change in EU Directives and OECD reform has left my head spinning.
I don’t have to remind anyone in this room of the critical role our 12.5% corporation tax rate played in attracting foreign investment to Ireland. And thanks to the Department of Finance’s deft handling of the negotiations leading up to last October’s OECD agreement, we now have clarity that the rate, when implemented, will be set at precisely 15%. And, crucially, the 12.5% rate will be retained for our smaller businesses.
And assuming that we don’t get caught between a failure to get approval for the reform in the US and the adoption of the EU Directive, we will need to look at other competitive levers.
In recent Consultation responses to the Department of Finance, we have outlined proposed competitive measures such as the urgency of introducing a territorial system of taxation, measures to improve our R&D tax credit and IP amortisation offerings within a Pillar 2 world, and the simplification of tax legislation.
For example, there are likely only a handful of people in this room who haven’t felt the pain of, for a relatively simple loan arrangement, having to work through interest limitation rules layered on top of anti-hybrid rules, layered on top of various interest anti-avoidance provisions, not to mention the gift that keeps on giving – the section 247 interest rules. And while these complexities keep the likes of me in work, simplification of these rules or our foreign tax credit regime would be really impactful.
The beauty of our 12.5% rate was its simplicity and clarity. Before the global minimum rate comes into effect, we need to ensure that we are not undercut by the reliefs and exemptions offered by other countries. We have already seen other countries sharpen their measures and point to their benefits in competing for investment against Ireland.
Moving to the Commission on Taxation, views have been sought on how the taxation environment could support productivity and innovation in indigenous enterprise.
The Institute’s submission has highlighted that the tax reliefs intended to help our indigenous sector have some serious shortcomings. For example, limits in the R&D tax credit regime for outsourcing restrict collaboration among businesses and, crucially between businesses and third level institutions. Surely, a tax measure intended to drive innovation should be promoting collaboration rather than penalising it?
Another example is KEEP, the Key Employee Engagement Programme. In the current tight labour market, this share option scheme should be inundated by small businesses seeking to improve their package for key staff. The reality is that a very limited number of companies avail of the Programme. It’s just not working.
But, of fundamental importance to potential investors is the headline rate of CGT. It hasn’t been reviewed since it was increased during the financial crash and at 33%, it is high by international standards. The Institute believes a reduction for active business assets would encourage innovation and productivity in our domestic sector as well as increasing the yield.
With the scope for competition in corporate tax set to be significantly narrowed for our multinational sector, personal tax regimes and the cost of employment will become increasingly important factors in the decisions international businesses make about where they locate and invest.
As a professional services employer myself, no different to any businesses or professionals sitting here tonight, attracting talent to Ireland is a key obstacle to growth in our businesses and the wider economy.
Our effective personal tax rates at average salaries and above are high by international standards and Irish workers earning over €48,000 a year pay more income tax than workers in competitor countries, such as the UK, Switzerland and, the US.
In 2021, 25% of income earners paid 83% of the total income tax and USC collected.
The fact is our personal tax base is unusually narrow and, in our view, a broader base in which all taxpayers contribute according to their means would bring Ireland into line with other European countries whose systems are frequently held up as an example.
I have personally had really difficult discussions with prospective highly skilled talent who were interested in moving to Ireland but are struggling with the impact of higher income tax, finding accommodation and a delayed employment permit or entry visa process.
Good quality public services are a critical factor in attracting investment. Availability of good quality housing, education, health services and public infrastructure are as important to the talented workers we want to attract to our country as they are to those of us who live here. Making Ireland a good place to live and work in must be a clear priority.
This will cost money and tax increases seem inevitable. The report of the Commission on Taxation and Welfare will, no doubt provide guidance for Government. But ultimately, tax measures are for the Government to decide.
Minister, as your deliberations on the Budget get under way, we would ask you and your colleagues to bear in mind that since 2014, the Irish economy has grown by more than 50 per cent and more than 400,000 new jobs have been created principally as a result of increased investment by the private sector.
We are fortunate that even in these uncertain times, companies are continuing to invest in Ireland and record amounts of capital is flowing into Irish businesses as investors from abroad back our homegrown entrepreneurs.
When it comes to serving the common good, the role of business is to create jobs and pay taxes into the Exchequer. The role of Government is to foster an environment that continues to attract foreign investment, encourages domestic enterprise, and rewards work.
Both of us need to deliver.
Before I finish, I wanted to say a few words of thanks. Firstly, I want to thank you the members for your participation in the Institute.
I want to thank my colleagues in Deloitte for picking up the slack while I swanned off to Institute events.
I want to thank Sandra Clarke, my predecessor in this role who was President in the darkest days of the pandemic. Throughout her term, she was a strong advocate for the small businesses most exposed to the crisis. Thanks so much, Sandra for the superb job you did in a year like no other in our history.
I also want to thank fellow Council members for their unfailing support and of course the excellent team we have in the Institute. Despite being on Council for years, it is only this year that I really got the opportunity to see how brilliantly the Institute team operates. We should be proud as members to have such dedicated support.
And lastly, a word of thanks to my family, particularly my husband Dave for unending kindness, laughter and support. If anyone is wondering who the two most handsome guys in the room down here are, they are my boys, Cillian and Billy. I appreciate you getting out of tracksuits and soccer gear to sit and listen to boring speeches.
So with that, I hope that you enjoy the night and the opportunity to reconnect.