KPMG warns Irish tax deals for global firms near an end

The days of global corporations exploiting Irish tax agreements to minimise their tax bills may be coming to an end, according to KPMG.

The KPMG Corporate and Indirect Tax Rate Survey 2014 found that Ireland had the fourth lowest corporation tax at 12.5% along with Cyprus and Liechtenstein. The lowest corporation tax in the world went to Montenegro with a 9% rate.

Despite Ireland’s internationally low corporation rates, many companies exploit loopholes in international taxation agreements to further lessen their tax bill.

KPMG has warned that due to increasing pressure from the OECD and EU, these taxation practices will have to end.

“All signs suggest that we will continue to see increased pressure for more transparency between taxpayers and the tax authorities, and more disclosure by public companies as to the amount of their tax payments and where those taxes are being paid.

“Ultimately, business leaders, tax authorities and policymakers will need to remember that this is a changing world and one can resist the change or embrace it. The problem with the former is that one tends to get left behind. Do not become complacent: this issue is not going away,” the survey stated.

Head of tax at KPMG Ireland, Conor O’Brien, said that Ireland could be a beneficiary of these moves as they are targeting companies that have no substance to their operation abroad.

“Ireland is well placed in this as most of the multinational corporations have large operations here,” he said.

However, Mr O’Brien said another key element of the Irish tax regime, personal taxes, could end up being a reason for multinationals not to locate operations here.

He said the OECD were looking at where key personnel were based as a metric for allowing tax reliefs on transfer pricing and the use of intellectual property and that the Irish higher rates of tax are too high to attract mobile high earners.

In particular, Ireland has high personal tax rates in relation to competitor countries such as Switzerland, Hong Kong and Singapore which have top rates of income tax in the region of 20%.