State reassures multinationals over 12.5% tax rate

THE Government has again reassured businesses that Ireland will retain its low corporation tax rate.

According to the American Chamber of Commerce, corporations in Ireland will be reassured, as the Government has now removed uncertainty concerning the 12.5% corporate tax rate.

The Government also continued to insist the rate is protected in an EU context by the principle of unanimity in taxation matters.

Chief executive of the American Chamber of Commerce in Ireland Joanne Richardson said: “The maintenance of Ireland’s corporation tax rate will be the driver for export and employment growth.”

As one of the lowest corporation tax rates in Europe, the rate has been credited as bringing many big multinationals to Ireland. There were fears last week, however, Ireland might be forced to increase the rate following the injection of cash from Europe and the IMF.

The Government said in its four-year plan that while taxation has to play a part in restoring balance to public finances, this will not apply to the corporation tax rate.

It said the rate is now part of Ireland’s “international brand”.

Head of tax services at Ernst & Young, Kevin McLoughlin said: “There has been much uncertainty in recent weeks about the longevity of the rate, so this endorsement within the terms of the plan should help reduce those concerns. This will send out a clear statement that Ireland, despite its economic difficulties, is still very committed on incentivising the creation and maintenance of high value jobs.”

Employers’ group IBEC also welcomed the “clear statements” that the corporation tax rate will not change. The body said steps need to be taken to improve the labour market and get people back to work.

More than 1,000 manufacturing companies in Ireland are already experiencing an increase in their corporation tax rate from 10% to 12.5% as the transitional provisions of the 10% manufacturing rate of corporation tax come to an end in 2010. Chief executive of the Dublin Chamber, Gina Quin said: “One of Ireland’s strengths is the transparent nature of its taxation strategy.

“We are living in uncertain times; we must show the investors there are some certainties. Therefore, the clear commitment of the 12.5% corporation tax rate, while not a surprise, will be a welcome sign to them.”