‘Complex changes have materially increased the compliance burden’

DEREK HENRY Head of Tax BDO Ireland

TAX ISSUES For companies, a lot of new legislation and guidance has been issued over the last couple of years. For example, there are updated rules regarding transfer pricing and new rules regarding anti-hybrids and interest deduction limitations. These are complex changes and they have materially increased the compliance burden for many of our clients, and there is no let-up in sight given the various EU and OECD led changes coming down the line.

TAX DEBT I am not convinced there will be a wide-ranging amnesty. However, there may be some scheme created that helps businesses deal with the liability over time. For example, business could be given a credit for certain behaviour, such as an increase in employee numbers, that could be offset against warehoused liabilities.

CAPITAL TAXES Experience has shown us that high rates of capital taxes reduce the number of transactions and drive aggressive tax planning. When the rate was reduced to 20%, the amount of CGT collected increased.

There is research to suggest the rate of capital taxes should be half the rate of income tax, which would suggest that the Irish rate of CGT should be closer to 20%. Paying a third of capital gains in tax is considered very high, particularly with the absence of indexation relief in a high-inflation environment.

TAX INCENTIVES We need a vibrant and well-established indigenous enterprise sector and therefore support should be given to this important group who provide significant employment across the economy. The goal of any government policy, as regards to tax measures aimed at supporting the creation of high-value jobs, needs to ensure there are as few barriers as possible to accessing and maximising reliefs such as R&D relief when you are an SME or indigenous business.

EIIS has become more attractive in recent years as the full 40% relief is given in year one. The rules are particularly hard to follow for companies, so any simplification that can be brought would be welcome. The fact that the clawback of the relief as a result of a fault in the qualification of the company now arises on the company gives investors a level of comfort that was not there previously.