Business tax compliance burden is compromising Ireland’s competitiveness

  • Institute President argues business tax compliance burden needs to be lightened while maintaining robust administrative system
  • Institute calls for territorial system of taxation as ‘Ireland is now an outlier among OECD countries’

Friday February 24, 2023. The President of the Irish Tax Institute today warns that the complexity of our business taxes is damaging Ireland’s reputation as an easy location for doing business.

In his address at the Institute’s Annual Dinner in Dublin, Colm Browne, a Tax Director with PWC and leader of the firm’s Centralised Corporation Tax Compliance function, tells guests: “The Corporation Tax Return now runs to 56 pages – it was 8 pages in 2001. And the same form applies whether you are a small domestic business or a large multinational.

The Guest of Honour at the Annual Dinner is the Minister for Finance, Michael McGrath.

Mr Browne says that at a time when tax is becoming ever more complex, the compliance burden needs to be lightened while maintaining a robust and vigilant administrative system.

The President also calls on the Government to announce its intention to move to a territorial system of taxation in this year’s Finance Bill. The current regime, in which Irish based companies are subject to taxation on their foreign source income, is unduly complex and causes a lot of uncertainty for business.

The amount of revenue accruing to the State under our worldwide regime on foreign source income is negligible as double taxation relief for taxes paid in other jurisdictions on foreign income is provided through credits against domestic tax liability.

Ireland is now an outlier among OECD countries in persisting with a worldwide regime and we know from member firms that it is being used against us by our competitors in the fight for investment.

Mr Browne points out that large multinationals are currently making restructuring decisions in anticipation of the new global minimum rate. “An early confirmation from the Government of its intention to move to a territorial regime, with a participation exemption for foreign dividends and branch profits, would greatly strengthen Ireland’s position at the negotiating table and help us to protect existing and future Foreign Direct Investment.”

Welcoming the establishment of a formal Business Tax Stakeholder Forum, which will enable consultation on the forthcoming legislation for the introduction of the new global minimum effective corporation tax rate for large companies, Mr Browne says: “It is critical that the legislation underpinning this major change provides clarity and tax certainty for business in Ireland.”

Mr Browne also says that competitiveness is important in attracting investment in our indigenous sector. The Institute welcomes the changes to SME supports recommended in the Report of the Commission on Taxation and Welfare and strongly agree with the Commission’s conclusion that incentives such as the R&D Tax Credit and the Employment Investment Incentive Scheme should be reformed to make them more accessible to small businesses and start-ups.

If we don’t make our incentives more attractive, investment will flow overseas and the gap between our domestic and international economy will continue to widen, increasing our exposure to any future FDI shocks,” the President concludes.