Corporation tax rate unlikely to change

IRELAND’S corporation tax rate of 12.5% is unlikely to change over the next 10 years despite pressure from France and Germany.

NCB Stockbrokers economist Brian Devine said: “We don’t believe that Ireland’s effective corporation tax rate will rise anytime in the next decade.”

Mr Devine said the Government still has its EU veto in relation to taxation issues and has maintained its commitment to the rate. NCB do not expect that stance to change.

The economist said that because Ireland is reliant on EU/IMF funding, its bargaining power at the EU table has been weakened.

“Nonetheless Ireland’s only concession on the corporate tax issue with regard to its current bailout, which runs until the end of 2013, is Ireland’s willingness to participate constructively in the discussions on the common consolidated corporate tax base draft directive.’”

Mr Devine said that if Ireland can wean itself off EU/IMF support then it will retain its veto and not budge on corporate tax.

“However, if Ireland is in need of further EU assistance post-2013 then Ireland may be pressured into signing up for the common corporate tax base (CCTB),” he stated.

Mr Devine said it is difficult to see how Ireland will be able to fund itself at sustainable rates post-2013 and will require further EU funding, increasing pressure.

“Even if Ireland were to adopt the CCTB in this scenario, the current EU proposals imply that each company in Ireland could choose whether or not to adopt the CCTB or to stick to the national tax regime as outlined in the EU proposal for the CCTB.

“In this instance there would be little to worry about from the Irish perspective.

“Those companies resident in Ireland who wished to use the CCTB could, whereas those who [prefer] to be taxed under the Irish system could do so also,” he said.

While the EU proposal outlines that a company should be able to choose between the CCTB regime or a national regime, it would not be possible for a company to do so if there is only one regime, Mr Devine points out.

“Germany and France have both highlighted that it would be inefficient to operate two systems and they therefore only intend to operate one system, the CCTB, should it be approved by the EU council.

“The worry is that once the CCTB is in place in any form, voluntary or not, it will signal the beginning of the end for national corporation tax policy,” he added.