Multinationals will benefit from steady corporation tax

Ernst & Young have praised the Minister for Finance Brian Lenihan for not increasing the 12.5% rate of corporation tax.

The taxation experts said the move was good news for multinational companies in Ireland.

Kevin McLoughlin, Head of Tax Services, Ernst & Young said: "For multinationals with operations in Ireland and those considering investing in Ireland, there was encouraging news as the minister strongly reiterated the Government’s commitment to maintaining the 12.5% rate of corporation tax."

He said research and development companies should benefit from the rise in tax credit from 20% to 25%.

Mr McLoughlin said: "For companies engaged in research and development the increase in the tax credit from 20% to 25% should build on the enhancements to the regime in last year’s budget, to provide significant incentives for companies to carry on R&D in Ireland.

"There was also the prospect of further good news with the Minister requesting the Commission on Taxation to consider how the tax system might be used to enhance this area further.

"There was good news for small start up businesses with the announcement of a remission of corporation and capital gains taxes in the first three years, though it remains to be seen how widely applicable it will be given that start-up business often make losses in the early stage of their development.

"The tax payment dates for companies have been accelerated and it is projected that it will result in a significant hit to their cash flow.

"Business will suffer a lot from the various indirect tax increases, for example, additional charges on airfare, petrol costs for those with car fleets and BIK on car spaces.

"The increase in the VAT rate to 21.5% will be a real cost for businesses who are not in a position to recover VAT such as those in the health and education sectors.

Mr McLoughlin welcomed the development for the commercial property sector with the reduction in the top rate of Stamp Duty from 9% to 6%.

He said: "With the increase in the rate of capital gains tax to 22% and the difficulties companies face in financing commercial property ventures, it remains to be seen whether it will have an immediate impact."