Ireland among best for tax efficiency

The Irish tax system ranks among the highest in the world in terms of ease of businesses in paying taxes, a report by PwC has found.

The Republic came out top in the EU for efficiency in paying taxes, and fourth overall in the world, says the report.

It says Irish companies pay a total of 26% of their profits in taxes compared to 39.3% for the EU and 40.3% globally.

Of the 26%, almost 12.5% is in profit taxes, just over 12% is on labour taxes, which is mostly PRSI, and 1.4% in other taxes such as VRT, said PwC.

Ireland is substantially more competitive on the cost of employing people, said PwC, compared to the average for the EU in labour taxes of almost 26%.

According to the report, a typical Irish company spends around a quarter of its total commercial profit in taxes, spends just over two weeks dealing with its tax affairs, and makes a tax payment nearly every six weeks.

Globally this compares to the typical company paying well over a third of its commercial profit in taxes, spending nearly seven weeks dealing with its tax affairs, and making a tax payment every two weeks.

Peter Reilly of PwC Ireland said: “For Ireland, one of our biggest concerns is how to manage our international tax reputation.

“As a country, we have been very good at providing an environment where companies can align their intellectual property, employees, and profits, and demonstrate substance.

“However, we need to be careful to move in line with other countries, not ahead. It appears likely that companies will pay more tax in the future, but where, how, and how much is not yet clear.

Ireland must continue to work with the OECD to ensure we continue to have a corporate tax system that is fit for purpose and at the forefront of global standards.

The firm’s head of tax, Joe Tynan, said the report shows Ireland remains a very attractive location to do business.

“Ireland’s total tax rate on corporate profits is much lower when compared with many other EU countries such as the UK, Germany, Sweden, and France, and also the US and China,” he said.