Accountants urge state to hold on to low tax appeal as global tax deal looms
Ireland should maintain a ‘low tax policy’ even when a 15% corporate tax rate comes into play, accountants say.
A survey by accountancy firm ACCA and consultants Grant Thornton shows that 89% of tax professionals say low tax is “critical” to Ireland’s ability to attract foreign direct investment ( IDE).
Of 180 accountants surveyed, 87% said Ireland would gain a “competitive advantage” over the UK, which plans to raise its corporate tax rate from 19% to 23%.
“With a targeted climate action plan, infrastructural connectivity and an impactful housing strategy, a low corporate tax rate remains a hugely influential element of Ireland’s FDI benchmarks,” said Caitriona Allis, Director of ACCA Ireland.
She said maintaining a low corporate tax rate “will help businesses access the EU single market and, in turn, create an environment for economic growth in Ireland”.
“With many factors affecting the global FDI sector – including the war in Ukraine, rising energy costs and inflation – it is more important than ever that Ireland positions its strong fiscal credentials.”
Last year, 137 countries, including Ireland, agreed to impose a 15% “minimum effective” tax rate on multinationals.
In talks led by the Organization for Economic Co-operation and Development (OECD), they also agreed to make the most profitable groups pay part of their taxes where they make their sales, rather than where they are incorporated.
This part of the deal could cost Ireland up to €2 billion a year.
But OECD talks on the tax shift are dragging on and won’t be finalized until early next year.
The US Congress has so far failed to move the deal forward as it is paralyzed by opposition to President Joe Biden’s spending plans.
The 15% rate is also under threat in the EU after Hungary canceled its support earlier this month.
Hungary’s 11th-hour decision – it had backed a French compromise that allowed derogations for some countries and postponed the tax until 2024 – sparked calls for an end to national vetoes on EU tax laws .
Irish EU Commissioner Mairead McGuinness said last week she would favor scrapping veto rights in cases where countries hold the bloc to ransom on non-tax issues.
His colleague, the head of the economy Paolo Gentiloni, said yesterday that the removal of veto rights should not be used to “harmonize tax policy through the back door”.
While he said there were “several fiscal elements” that could be agreed upon by a majority, he insisted that smaller countries needed to be protected “in some way”.
Mr Gentiloni told MPs that Hungary’s position is “formally legitimate, of course, but in my view, politically incomprehensible”.
“I think the use of the veto must also respect loyal cooperation between member states, because otherwise it is very, very difficult to make decisions,” he said.
France had hoped to complete the deal before the end of its EU presidency on June 30.