France has lower effective tax rate than Ireland: study

Luxembourg, Switzerland and France all have much lower effective corporate tax rates than Ireland, according to a study by PricewaterhouseCoopers (PwC) and the World Bank.

The report notes that in many countries there is a substantial difference between the statutory corporate tax rate and the effective tax rate.

In France the statutory corporate tax rate is 33.3% while the actual effective tax rate is lower than Ireland’s 12.5% at 8.2%.

Luxembourg has a statutory rate of 22.5% but an effective rate of just 4.1%. Ireland has a famously low statutory corporate tax rate of 12.5% but its effective rate according to the study is 11.9%.

Feargal O’Rourke, head of tax at PwC Ireland, said the transparency between Ireland’s statutory and effective tax rates were part of why it was attractive to multinational companies.

“Ireland’s transparent tax regime and low corporate tax rate, together with the relative ease to pay tax, is vital in continuing to underpin the positioning of Ireland as a location of choice for foreign direct investment. This transparency and relative ease to pay taxes is an even more important element in providing us with an opportunity to help multinational corporations establish operations in Ireland,” he said.

In fact Ireland is one of the easiest places to pay business taxes. Out of the 185 countries that the report looked at, Ireland ranked sixth easiest in the world and the easiest in the EU.

The study found that on average a typical Irish company spends just over a quarter of its commercial profit in taxes and spends just two weeks dealing with its tax affairs.

Globally this compares to the typical firm paying nearly half of its commercial profit in taxes and spending over seven weeks dealing with its tax affairs.

“All of this is great news, particularly given the ongoing financial and economic uncertainty. The survey demonstrates that, having simpler tax systems with competitive business tax rates, gives Ireland a real advantage in the market for attracting direct investment,” said Mr O’Rourke.

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