Ireland continues to be the easiest country in the EU & EFTA region to pay business taxes - new report confirms

Ireland is the easiest country in the EU & EFTA* region to pay business taxes for six years running and the sixth easiest country in the world. This is according to a new report issued by PwC, the World Bank and the IFC entitled ‘Paying Taxes 2013 – The global picture’. The report covers 185 countries worldwide and looks at all taxes paid by businesses, using broad principles from PwC’s Total Tax Contribution Framework.

The ranking by PwC/The World Bank is unique as it looks beyond corporate income tax to all of the other business taxes paid and is a measure of effectiveness of tax systems around the world. The Paying Taxes 2013 report measures the ease of paying taxes by assessing the administrative burden for companies to comply with tax regulations, and by calculating companies’ total tax liability as a percentage of pre-tax profits. Taxes and contributions measured include the profit or corporate income tax, social contributions and labour taxes paid by the employer, property taxes, property transfer taxes, dividend tax, capital gains tax, financial transactions tax, waste collection taxes, vehicle and road taxes, and other small taxes such as fuel taxes etc.

It shows how businesses are affected not only by tax rates, but also by the procedural burden of compliance. The report focuses on three indicators which are used to determine the overall ease of paying taxes which are:

  • The time it takes to comply (Ireland ranked 3rd in the EU & EFTA region with 80 hours); The average time to comply across the region is 184 hours. The range of total time to comply varied from the lowest of 59 hours for Luxembourg and the highest of 454 hours for Bulgaria.
  • The cost of taxes, which is measured by the total tax rate (Ireland ranked 3rd in the EU & EFTA region with 26.4%); The average Total Tax Rate for the region is 42.6%. The range of total tax rate for the EU & EFTA region varied from the lowest of 21% for Luxembourg to the highest of 68.3% for Italy.
  • The number of tax payments made. Ireland’s number of payments is 8 compared to the average for the region of 12.8.

It is interesting to note for many European countries that there is a substantial difference between the statutory corporate tax rate and the effective tax rate. However, this is not the case for Ireland with an effective corporate tax rate of 11.9% compared to our statutory corporate tax rate of 12.5%. Ireland’s ability to cope with multiple tax payments and at the same time to have a system that eases the administrative burden is a credit to our regulatory and tax authorities. Taxes are a significant issue for business and the fact that we continue to hold our rank in this area is critical for continued investment in Ireland.

Speaking about the Irish results, Feargal O’Rourke, Head of Tax, PwC Ireland said:

"Ireland continues to be the shining star in the EU & EFTA region where ease of paying taxes is concerned and also continues to score excellently for the time taken to comply being third in the region. All of this is great news particularly given the ongoing financial and economic uncertainty. The survey demonstrates that, having simpler tax systems with competitive business tax rates, gives Ireland a real advantage in the market for attracting direct investment.” “One of the reasons why Ireland leads in the EU & EFTA region as the easiest country in which to deal with taxes is due to the Revenue continuing to make substantial advances in the area of electronic filing and payments and taking a proactive approach to making it ‘easier’ for companies to deal with their obligations."

The table below shows how Ireland compares to some other countries in the EU & EFTA region in terms of Total Tax Rate (from left to right; Profit tax; Labour tax and other taxes) showing France’s profit tax of 8.2% compared to 11.9% for Ireland and 22.2% for the UK. The chart also shows the Statutory corporate tax rate.

Country Statutory corporate tax rate (%) Profit tax(%)(effective corporate tax rate) Labour tax(%) Other taxes(%) Total tax rate
Luxembourg 22.47 4.1 15.4 1.5 21
France 33.33 8.2 51.7 5.8 65.7
Switzerland 11.5 -24.2 8.9 17.7 3.6 30.2
Ireland 12.5 11.9 11.6 2.9 26.4
Portugal 25 14.5 26.8 1.3 42.6
Germany 30-33 18.9 21.9 5.9 46.7
UK 23/24 22.2 10.2 3.1 35.5
Italy 31.4 22.9 43.4 2.0 68.3
EU&EFTA n/a 12.7 26.4 3.5 42.6
Global n/a 16.1 16.1 12.5 44.7

Note: Please note in the above chart that there may be multiple statutory corporate tax rates for individual countries ie varying local trade taxes, communal taxes, solidarity taxes etc.

According to the study, a typical Irish company spends just over a quarter of its commercial profit in taxes, spends two weeks dealing with its tax affairs and makes a tax payment nearly every seven weeks. Globally this compares to the typical company paying nearly half of its commercial profit in taxes, spending over seven weeks dealing with its tax affairs and making a tax payment every 2 weeks.

Economic analysis undertaken by PwC and featured in the report shows that economies where action was taken to reduce complexity in tax administration – both in terms of the number of payments and the time taken with tax matters – there has tended to be higher economic growth.

Top 10 rankings for the EU & EFTA countries on ease of paying taxes are, in order, are: Ireland, Denmark, Luxembourg, the UK, Switzerland, Norway, Malta, Netherlands and Cyprus.

The top 10 worldwide economies for ease of paying taxes are, in order: United Arab Emirates, Romania, Senegal, Hong Kong, Sinagapore, Ireland, Bahrain, Canada, Kiribati and Oman.

Feargal O’Rourke concluded: "Ireland’s transparent tax regime and low corporate tax rate together with the relative ease to pay tax is vital in continuing to underpin the positioning of Ireland as a location of choice for foreign direct investment. This transparency and relative ease to pay taxes is an even more important element in providing us with an opportunity to help multinational corporations establish operations in Ireland".


Notes to editor:

*European Union & European Free Trade Association (EU&EFTA). The following economies are included: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithunia, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden, Switzerland and the United Kingdom.

EU& EFTA Region
62% of the Total Tax Rate in the EU & EFTA is accounted for by labour taxes and social contributions. In Ireland this is 44%.

The average time to comply across this region is 184 hours (Ireland: 80 hours), 83 hours below the world average, and the lowest of any region apart from the Middle East.

The average number of payments at 12.8 for this region is the lowest apart from North America. This low number is largely a function of the common usage of electronic filing and payment for the major taxes.

The Total Tax Rate has fallen in the region each year since the study began apart from in the most recent year. The average rate has increased by 0.1% in 2011 over 2010.

The average hours to comply have fallen in each of the last seven years of the study, falling by 60 hours overall. The region has the second lowest time to comply.

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