Ireland to change company tax laws, but 12.5% corporation tax rate to stay

Tuesday 15 October 2013 19.01
Michael Noonan says Ireland wants to be part of solution to global tax challenge
Michael Noonan says Ireland wants to be part of solution to global tax challenge

Minister for Finance Michael Noonan has said that the country's corporation tax rate will not change, adding that the Government is committed to the 12.5% rate.

Giving his Budget 2014 address, the minister said the country's corporate tax strategy has three key elements - rate, reputation and regime.

He said that increasing tax reputation is a key factor in winning mobile foreign direct investment.

He said that the international rules for taxing multi-national companies have been in the focus over the last year, adding that global challenges require global action.

Ireland wants to be part of the solution to this global tax challenge, not part of the problem, Mr Noonan stated.

To this end, he said he was publishing a new international tax strategy statement, which sets out the country's objectives and commitments in relation to these issues.

He also said he will also introduce a change in the Finance Bill, which will ensure that Irish registered companies cannot be stateless in terms of their place of tax residency.

US senators John McCain and Carl Levin in hearings in March labelled Ireland a tax haven.

Apple, the maker of iPhones and iPads, reduced its tax bill by setting up a unit in Cork, which did not declare tax residency in Ireland because it is neither managed nor controlled in the country, according to Senate hearings. As the unit is incorporated in Ireland, it is not a US tax resident.

Investigations found that Apple avoided paying income tax on billions of dollars of profit during the past four years in part by moving patent rights to a web of offshore subsidiaries. The company said it does not use "tax gimmicks".

The proposed changes "will not impact on any Irish incorporated companies that may be tax resident in another low tax jurisdiction", said Peter Vale, a tax partner with Grant Thornton in Dublin.

"However, it sends out the right message in terms of Ireland's desire to be part of the global initiative to resolve global tax inequities," he added.

While some companies, such as Apple, cut their tax bills using Irish subsidiaries that do not declare tax residency anywhere in the world, others do so in zero-tax or low tax jurisdictions.

LinkedIn, for example, cuts its global tax bill by paying tens of millions of dollars a year in royalties to an Irish unit that declares its tax residence in the Isle of Man, corporate filings show.

American Chamber of Commerce welcomes tax move

The American Chamber of Commerce Ireland, which represents large multinationals that have Irish operations, welcomed the announcement of the tax strategy, saying it would a “clear and accurate picture” of the country’s corporate tax regime.

“This strategy reconfirms Ireland’s long term commitment to attracting foreign direct investment to create jobs and economic activity,” said Anna Scally, chair of the chamber’s taxation group.

She said the changes announced in relation to residency rules “should not adversely affect the existing operation of multinational companies in Ireland, nor the continuing competitiveness of Ireland as a location for foreign direct investment”.