KPMG's Shaun Murphy on tax measures in need of urgent reform to assist indigenous Irish businesses ahead of Brexit.
The tax rate on gains on sale of business assets by corporates is of concern to both domestic as well as international businesses. The current rate of 33% is uncompetitive and should be 12.5%.
In terms of inward investment, developments in international tax law mean that it is important to locate substance, including key decision makers, in the jurisdiction in which profits are reflected.
If Ireland is to be a location of choice for key decision makers, it’s important to also have a competitive personal tax regime for mobile executives. A number of things could be done such as removing non-domiciled individuals from the Capital Acquisitions Tax regime and replacing the non-domicile remittance system with an exemption system.
We work with a lot of clients with cross-border interests, operations or customers in Britain. Their main concerns are about disruption and the unknown where delays, checks and other currently relatively seamless processes become complex. Given the just-in-time nature of modern business it has become quite a challenge to anticipate the likely Brexit impact.
For example, tariffs could become a feature of business and make previously profitable areas unviable. We’ve been working with clients assessing such scenarios and quantifying other issues such as supply chain risks. Ultimately business will hope that the myriad of Brexit-related issues will be resolved via negotiation.
Entrepreneurs, regardless of whether they are Irish or from elsewhere are highly mobile and very regularly move location based on the taxation environment. So it’s very important to give a lot of thought to the tax policy matters as they effect entrepreneurship.
Ireland has been relatively less successful in encouraging domestic entrepreneurship of scale than at attracting inward investment of scale. Sticking with Capital Gain Tax, an improvement in Entrepreneurs CGT Relief would be welcome.
I expect that regardless of Brexit, the UK will continue to develop tax policies to attract business, and this will have a potentially significant influence on the level of business activity in Ireland. I hope the policy decision that Ireland takes to mitigate the effect of UK tax policies will continue to be informed by the clear need to encourage entrepreneurship, and to ensure that our tax code is comprehensive, efficient and competitive.
This is an abridged version of an article which appeared in the Business Plus Magazine, September edition, and is reproduced here with their kind permission.