Tax institute calls for system ‘rethink’

IRELAND’s tax system is not as good as it could be in encouraging research and development (R&D), according to the Irish Institute of Taxation.

The institute has listed 30 tax reforms it says are vital to keeping the Irish economy competitive.

Among its demands are an early pre-budget report detailing the broad outlines of the proposed tax reform for the forthcoming year.

Such a mechanism “would allow more informed and effective consultation”, it said.

The Commission on Taxation is carrying out a review of the whole tax system.

In its submission the institute also called for independent tax advice to be given to legislators and for enhanced tax incentives for R&D investment to be introduced without delay.

These are some of the key changes highlighted in the institute’s submission to the commission.

Its president Joan O’Connor said the purpose of its reforms is the achievement of a more competitive tax system.

The institute also said a “re-think” of the current system aimed at promoting a healthier business environment was required.

It is not fully appreciated that some of our key competitors offer better tax incentives than is the case here, she said, adding that with the economy changing constantly, it is crucial Irish tax incentives also evolve to cope with the changed environment.

“We are not nearly as effective as we could be in attracting R&D investment from abroad or in encouraging indigenous R&D activity,” she said.

If we are to win more foreign direct investment “then a re-think on tax incentives is a must”, she added.

Greater awareness of the R&D credit system and a widening of its definition is also needed to ensure the industrial base of the economy continued to grow at a pace that ensures its competitiveness.

However, complex administrative processes, poor levels of tax credits and the lack of refunds for start-up companies mean the incentives in place compare poorly with other countries, she said.