Creating an Ireland of opportunity

06 October, 2017

Pictured are (l-r): Liam Kavanagh, managing director, The Irish Times, Joe Tynan, head of tax, PwC Ireland; Paschal Donohoe, Minister for Finance and Feargal O'Rourke, managing partner, PwC Ireland.

PwC’s pre-Budget poll, launched today, reveals that reducing the personal tax burden is the key priority for the 2018 Budget. Three-quarters of Irish business leaders who responded (73%) want Minister Donohoe to widen the 20% income tax band. Over half (56%) support merging USC and PRSI. One in two are of the view that a potential significant US corporate tax rate cut would not impact their businesses.

Other priorities are investing in roads, health services and faster broadband (22%), dealing with the housing crisis (20%), and boosting Ireland's cost competitiveness (9%). 

Pat Mahon, Tax Partner, PwC, said: "Enhancing our attractiveness as a location for investment will be critical in a post-Brexit environment. The opportunity to do this is available when considering the proposed merger of the USC and PRSI. The expected widening of the 20% tax band for 2018 will not significantly impact on our competitiveness in attracting key talent to Ireland. However, a signal that a phased merger of the USC/PRSI will address our headline 52% rate is ultimately what is needed when competing on the international stage for more jobs to come to Ireland." 

Real Time Reporting not on the radar 

Just one in five (20%) of survey respondents have started planning for Real Time Reporting and PAYE modernisation. Stakeholder engagement, data management and payroll processes were among the biggest concerns expressed by attendees at PwC's recent Real Time Reporting workshop. 

Doone O'Doherty, Tax Partner, PwC, said: "Real Time Reporting (RTR) will come into effect for employment taxes and payroll compliance on 1 January 2019. It will be the most significant reform of the PAYE system in over 50 years. Employers will be required to report pay, tax and other deductions, as well as details of employees leaving their organisations, at the same time as they pay their employees. It will present a significant business process change and we urge businesses to start planning immediately." 

Improving entrepreneurial measures 

The survey suggests that the Minister should further improve measures that support entrepreneurs. Half (49%) of survey respondents want the current Entrepreneur Relief lifetime limit of €1 million on the sale of a business raised to €10 million. 

PwC's John Murphy said: "Promoting entrepreneurship and supporting the longevity of Irish businesses is critical for our future economic development. Enhancing Entrepreneur Relief in line with the equivalent UK regime would help incentivise entrepreneurship and create jobs in Ireland." 

US tax reform - Ireland should not fear 

Over half (51%) of survey respondents said that a potential significant US corporate tax rate cut would not impact on their businesses. 

Joe Tynan, Head of Tax, PwC, said: "When factoring in US State taxes on top of the Federal rate, the US 'corporate' tax rate would still be double our 12.5% corporate tax rate, which would still position Ireland well. It would not fundamentally change the attractiveness of the Irish Corporate Tax rate. US companies will always need to be close to the markets they serve and have access to key skills and a friendly business environment. In a post-Brexit world, Ireland will be the only English speaking country in the EU, with access to over 500 million people. With over nine out of ten Irish MNC leaders recently confirming that their investment in Ireland is a success, Ireland continues to be an attractive place to do business. 

There is one line in the recent US Tax Framework which will be of interest to all companies operating internationally. It says "To prevent companies from shifting profits to tax havens, the Framework includes rules to protect the US tax base by taxing at a reduced rate and on a global basis the foreign profits of US multinational corporations". While there is little detail around this proposal, to the extent it is ever enacted, it is likely that these rules will be applied to companies whose profits are taxed at lower than some reference rate. What rate will that be and what rate of tax will the US apply to such profits are two key issues we will watch closely." 

Loss of competitiveness a key Brexit challenge 

According to the survey, Ireland’s potential loss of competitiveness is the greatest business concern arising from Brexit (36%). Other concerns are pressure on margins due to Sterling/Euro exchange rate fluctuations (20%) and the continued freedom of movement of people (16%).

PwC’s John O’Loughlin said: "Brexit is a real uncertainty for Irish businesses, with nine out of ten Irish CEOs saying it is a key concern for business growth. Businesses cannot wait for the negotiations to conclude and we urge all businesses, if they have not yet started, to proceed with planning immediately. Companies need to proactively prepare themselves for every eventual outcome." 




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