Taxing Times For Irish Business
As the political mood music moves towards ever higher taxation levied on entrepreneurs and employers, Colm Browne of the Irish Tax Institute tells Emily Styles why the tax base should be broadened
Colm Browne was recently inaugurated as the Irish Tax Institute’s 47th President. He is a Tax Director with PwC and heads up a centralised corporation tax compliance function for PwC in Kilkenny. He trained and qualified as a Chartered Tax Adviser in PwC in Dublin, progressing to the role of tax manager, and then moved to Limerick to work with BDO. He joined OBI, a smaller practice, where he was partner for about ten years. Browne re-joined PwC in 2018.
The Institute made multiple recommendations in its submission to the Commission on Taxation and Welfare. In your view, which recommendations have the highest priority?
A central theme of our submission was competitiveness, and with a global minimum corporate tax rate on the horizon we said it was essential to find other ways of making our tax system attractive to foreign investment. We recommended that the R&D tax credit should be enhanced and continually benchmarked against key competitor jurisdictions to ensure it is best in class for our SME sector as well as multinational companies.
We also called for a reduction in the marginal cost of employment in Ireland for both businesses and individuals. And we called for simplification of our corporation tax code. Clear, simple, and efficient business taxes could be a real differentiator for Ireland. Simplification would make it easier and more attractive to do business in Ireland. It would also increase
compliance and engender trust in the system among taxpayers.
How vexing an issue is tax compliance for taxpayers?
The reforms at global and EU level over the last five years have made tax compliance very onerous for businesses of all sizes. Simplifying the reporting burden would help Ireland to be seen as an easier place to do business. One area where progress could be made is in the pre-population of forms from the huge amount of data that Revenue have at their fingertips. That could help remove a lot of administrative headaches. Revenue has already started doing this, but more could be done.
Some of the business tax reliefs need reform to make them more user-friendly for SMEs. With the R&D tax credit, smaller businesses are often afraid to make claims in case a subsequent review results in a clawback of the funds. The Institute has proposed there should be a preapproval process for small and micro businesses so there is some reassurance they meet the criteria in advance.
Paying down warehoused tax debt will be a challenge for many companies. What’s the feedback from ITI members about Revenue’s approach to this issue?
We are undoubtedly entering into the most difficult phase of the repayment process as we move from 0% to 3% rate of interest on warehoused tax debt at the end of the year. To be fair, Revenue has said it will take a pragmatic approach and we will be asking that account is taken of the impact of the current very difficult economic environment on our SME sector. It’s important that we can get proper, realistic phased payment arrangements in place so that businesses can weather this storm. Inevitably, some won’t, but companies that have been profitable and compliant should be given a fighting chance.
International tax reform that would raise Ireland’s Corporation Tax rate to 15% seems to have stalled. Why does uncertainty over the CT rate matter to Ireland Inc?
Certainty is everything in business. If companies have certainty, they’ll adapt. Irrespective of what happens with the Framework Agreement, I think it’s likely that the 15% rate will be the implemented at an EU level. Whether the US comes on board is still unclear,
but it’s still all to play for and we’ll probably see it close out before the end of the year. Obviously, we need to bear in mind that Ireland is retaining its core 12.5% rate for our SMEs and that the 15% rate only applies where turnover is above the €750m bracket.
Why does the Institute believe that the Capital Gains Tax rate should be reduced from 33% to 25%?
To reward and incentivise the people who take risk in business, CGT needs to be reviewed and used as a competitive lever to attract talent and investment, both domestic and foreign. At 33%, Ireland has one of the highest CGT rates among our competitors and we believe reducing the rate to 25% for active business assets could significantly increase the yield to the Exchequer.
What is the Institute’s view on income tax?
Our personal tax system is an important factor in Ireland’s competitiveness, and effective personal tax rates at average salaries and above are high by international standards. Successive governments have used the personal tax regime to redistribute income to lower paid workers, leaving the system overly dependent on higher paid workers, many of whom work in the multinational sector. In 2021, 25% of income earners paid 83% of the total income tax and USC collected, and foreign multinationals accounted for 32% of employment and 49% of employment taxes in 2019.
A broader personal tax base in which all taxpayers contribute according to their means would bring Ireland into line with other European countries whose systems are frequently held up as an example. More generally, a broader tax base would correct the current over reliance on economically regressive labour taxes and tip the balance in favour of indirect taxes, such as environmental charges which would also support the decarbonisation of our economy.
Is the current throughput of tax professionals with Institute training sufficient for the demands of employers?
The Institute’s throughput reflects the graduate intake of members firms, and we work hand in hand with the employer firms to promote the career in tax and respond to their training needs. There are lots of opportunities for Chartered Tax Advisers in industry, the public service and, of course, in all our member firms. Tax is ever changing, and the skills of the tax adviser are in demand. They’re also kept on their toes to stay abreast of developments in this fastmoving sector.
‘Simplifying the reporting burden would help Ireland to be seen as an easier place to do business’