The Irish Government have made it very clear that Ireland intends to support the UK and maintain its close ties with the UK in so far as possible following Brexit. While it is difficult to take a benefit from a friend’s loss, Ireland must have no qualms about taking every opportunity arising in the wake of the Brexit fallout. Change brings with it opportunity.
Former Chancellor for the Exchequer, George Osborne’s recent announcement in relation to cutting the UK’s corporate tax rate certainly made clear Britain’s intention to shape themselves and their tax regime post-Brexit to compete with Ireland’s tax regime in the race for FDI. France has now climbed on the band wagon and is introducing income tax policies to encourage FDI, with Prime Minister Manuel Valls stating, "We want to build the financial capital of the future," at the annual conference of France’s financial services lobbying group Europlace.
Following Theresa May taking the reins as Prime Minister on 13 July, a cabinet reshuffle in the UK is well underway with announcements coming in every few hours. Amongst various other changes, Philip Hammond has left the Foreign Office and been named Chancellor of the Exchequer calling into question the reduction of the UK corporation tax rate to 15% announced by his predecessor George Osborne.
These are definite statements of intention and it seems highly probable that other countries will follow suit. The playing field is officially open and competition for FDI is going to be fierce.
There are a number of potential opportunities for Ireland presented by Brexit:
- despite the UK’s intention to cut their corporate tax rate to 15%, it should be possible to secure a greater share of foreign direct investment as Ireland is about to become the only native English-speaking countries in the EU;
- financial services headquarter operations may currently be moved from the UK to another jurisdiction within the EU by which they “passport” their financial services – Ireland provides a similar economic and cultural landscape to the UK and will be one of the only English speaking members of the EU – it needs to market itself as the obvious jurisdiction for new business and any re-locations with all requisite government agencies adequately prepared to deal with the added pressures/activity (i.e. Revenue, Central Bank, CRO);
- it may be possible to strengthen our trade with the UK as new trading terms will require to be negotiated with the strength of being a member of the EU;
- UK companies may look to extend existing operations beyond the UK to maintain an EU presence. The similarities in how we do business allows us to provide the best location for this;
- it is likely that the UK will look to other jurisdictions such as North America for closer ties – this is an economic relationship we're uniquely positioned to contribute to, and benefit from on a potential tri-lateral basis;
- the opportunity (and challenge) to concentrate on and develop the EU and other markets and reduce reliance on UK market;
- It is a timely opportunity to review our tax regime to ensure that it is competitive and attractive with particular reference to securing FDI - a detailed review and possible overhaul of our existing investment incentives (as limited in the context of BEPS and OECD scrutiny) such as SARP, share schemes, headline income tax rate, R&D credit, knowledge development box, start-up company exemption amongst others should be considered bearing in mind our biggest competitor now has the freedom to incentivise FDI through its tax regime without restriction by the EU;
- expand our tax base by ensuring that any individual seeking to reclaim their Irish heritage is encouraged to do so with information readily provided to inquiring individuals on the process involved; and
- Ireland will also need to take the opportunity to improve infrastructure with office space, schooling, transport and housing top of the agenda.