The Minister today released the Corporate Tax Roadmap document, which provides an update on Ireland’s corporate tax regime, particularly in the context of global tax developments.
The importance of MNCs to Ireland in terms of tax receipts generally is underlined in the Roadmap, together with the role of Irish pharma and medtech companies in particular in the global fight against COVID.
The future uncertainty in the global tax landscape is noted in the Roadmap. Challenges lie ahead, in particular with the OECD’s latest initiatives which aim to reallocate a portion of corporate profits to market jurisdictions. This would partially erode the corporate tax take in Ireland.
With Democrats now in effect holding both Houses in the US, the probability of more fundamental US tax reform increases, including further penalising US groups that hold their valuable IP in countries such as Ireland. While not called out in the Roadmap, this is a further medium to long term threat to our corporate tax base.
Of interest will be plans to launch a consultation phase on moving towards a territorial regime. While not likely to impact on actual tax take, it should bring much needed simplicity to aspects of our tax regime that will make it more attractive to foreign investors.
As expected, Ireland is due to legislate for new interest limitation rules later this year, to come into effect on 1 January 2022. Originally it had been hoped to delay implementation of these rules until 2024 but pressure from the EU has seen this date move forward.
Also under review are measures to counter payments to offshore locations, including “non-cooperative” jurisdictions. While these are less relevant now following the migration of most significant IP away from tax havens, the tax deductibility and withholding tax position in respect of such payments will be considered to see if any further measures are required.
The Minister’s statement on the need to remain both agile and competitive, within a “forward looking business environment” is critical given the high probability of further global tax changes that will impact Ireland. To the greatest extent possible, we will need to respond to these changes in the future to ensure our tax regime remains a competitive and compelling location for foreign investment.