Caroline O’Driscoll, Partner with KPMG, Cork, says that tax has played an important role in attracting FDI into Ireland for decades.
“As a small open economy this makes sense, has created job opportunities, and has served us well,” she says. “But the sands are shifting. The OECD BEPS project (Base Erosion Profit Shifting) aims to redefine the basis upon which countries tax profits of global business and to ensure greater transparency.
“It represents a frame- work for global taxation of crossborder business. Many companies have found themselves in the news headlines due to their tax affairs. Tax is suddenly on the agenda in the board room at a level never seen before.”
Whatever your views, one thing is clear, change is nigh. So how is Ireland positioned in all of this?
“I’d argue we are well positioned. One thing that the BEPS programme has brought internationally is a level of uncertainty and investors do not like uncertainty. They want to know that when they invest in a country, it has a stable and consistent tax regime. Ireland dealt with BEPS proactively — we moved quickly to eliminate the ‘double Irish’, and while other countries are still grappling with the implications of BEPS, Ireland introduced the world’s first and only BEPS compliant ‘IP regime’ (known as KDB). Ireland has provided a safe harbour for investors in stormy seas.”
Most vitally, she says, Ire- land has retained its low tax rate of 12.5% on corporate profits, one of the lowest in the world, and lower again at 6.25% for companies innovating in Ireland.
Add this to a 25% R&D tax credit and Ireland’s offering is attractive by European standards.
Investors have responded positively. Am- Cham report that total US investment to Europe fell 19% in the first nine months of 2014, while US flows to Ireland surged by almost 42%. Good news for Ireland.
“What next for BEPS? BEPS has a way to go yet, but I expect we will see in- creased transparency and more reporting requirements. Multinationals will need to examine their structures and ensure that they continue to be fit for purpose in this new post BEPS environment. With an open and transparent tax regime sup- ported by real substance (IDA supported companies employ more than 160,000 people in Ireland), we have nothing to fear and indeed this could represent an opportunity for Ireland,” she adds.
“We cannot be complacent, and need to watch closely as our competitor countries respond to BEPS and continue to enhance our offering where required. Access to talent is increasingly important as workforces become increasingly mobile.
“By international standards our marginal in- come tax rates are high and may become a barrier to attracting high skilled workers if we fail to focus on this. It may not be tax as we know it, but Ireland has responded well and with focused, consistent, and sensible policies we can continue to thrive into the future.”
This article originally appeared in the Irish Examiner and is reproduced here with their kind permission.