New accounting standards may bring tax rise

IRISH companies could end up paying more tax next year thanks to new accounting standards, a top accountant warned yesterday.

Ernst & Young partner Donal O’Sullivan said the impact of International Financial Reporting Standards (IFRS) should not be underestimated and that companies needed to be aware of the tax implications of changes to their accounting policies.

“Generally companies are taxed on their accounting profit. On the whole, this won’t change but, as a result of applying IFRS, companies’ actual accounting profits will,” said Mr O’Sullivan. “This will lead to a tax change and differences in amounts paid in tax.”

Mr O’Sullivan also said recent changes to tax law in the 2005 Finance Act had brought in measures to spread the tax effects of certain changes over five years, but that the transition to IFRS would have an immediate impact.

His comments came at Ernst & Young’s Spring Tax Forum, which was held in Dublin yesterday and attended by 120 business people.

The seminar also heard that changes to Irish company law that affected the responsibilities of company directors would place “a huge burden” on companies and their financial advisers. Ernst & Young managing partner Paul Smith said the Director’s Compliance Act imposed “onerous and expensive” obligations on companies and directors.

“It is hard to reconcile the inward investor friendly regime that Ireland seeks to the 2003 Director’s Compliance Act requirements,” said Mr Smith.

In a separate development yesterday, the group representing chartered accountants said Ireland would suffer as a result of the need for directors to personally sign off on their companies’ compliance with certain rules and regulations.

Institute of Chartered Accountants (ICAI) president Terence O’Rourke said other countries with more business-friendly laws would be the main beneficiaries of excessive regulation in Ireland.

ICAI research found one in four Irish companies will consider relocating elsewhere or changing their corporate status because of the new director requirements. Half the firms surveyed said the compliance process would cost over €50,000.

“This single legislative measure is being used by other countries to present Ireland as an over-regulated place to do business,” said Mr O’Rourke. “The damage that it causes far outweighs its possible benefits. It applies far too widely.”