Mazars was delighted to participate in the 2023 annual tax advisors survey with the Business Plus, which was published in November. Frank Green, Head of Tax, responds to editor Nick Mulcahy’s questions.
What aspects of business-related tax are busier for your firm now than in former years? Are there any recent developments in the firm’s tax practice that you want to mention?
Given the substantial international tax reforms either in effect or on the horizon, there has been a notable increase in complexities related to Transfer Pricing, Interest Limitation Rules, and the determination of taxable business presence in specific jurisdictions. To address these evolving demands, Mazars has established a dedicated transfer pricing team in conjunction with our centre of excellence based in Hungary. This initiative positions us to more effectively meet the expanding needs of our clients.
For decades, Ireland’s tax policy has been a crucial lever in attracting and retaining foreign direct investment. What should the government prioritise with tax rules to ensure that FDI levels are maintained?
It has recently been announced that 15% corporation tax rate will be legislated for by way of a top-up tax and the Irish Government needs to ensure that is not overly complex or costly to compute and pay. Early indications are that the tax calculations for this top-up tax will be complex and that needs to be addressed. In addition, the proposed branch exemption and exemption from tax for foreign dividends should be brought in as soon as possible to ease the overall compliance burden. Simplification of our tax system and legislation should be a priority in order to reduce the compliance burden for companies and enable them to focus more on the key aspects of the business.
FDI yields great results for Ireland in terms of jobs and tax revenue. Why does it matter that tax policy should also help build productivity and innovation in the indigenous sector?
Ireland is home to numerous tech and pharma FDI companies and these prosper on innovation and research. Our R&D system is a significant encouragement to carry out research and fosters innovation and we need to ensure this continues. We also need to encourage people to come to Ireland and our personal tax system is not aligned to our corporate tax, R&D and intangible asset regimes. Personal tax rates up to 52% are very high by international standards and these need to be addressed, ideally starting with a cut in USC. It is not ideal where the Government takes more than 50% of what you earn, after the standard rate bands.
Official policy is to persuade and encourage enterprise to reduce carbon emissions. What tax levers should be deployed to this end?
With climate change and the increased cost of fossil fuels due to the war in Ukraine, Ireland needs to support more the green agenda. Tax supports are a well-developed tool to orientate people and businesses down a certain path. A double deduction for corporation tax should be given for environmentally-friendly business expenditure for a five-year period. Individuals should also be able to avail of tax reliefs on energy rated equipment and solar panels.
Few special tax provisions attract as much left-wing criticism as the Special Assignee Relief Programme. In your view, what is the economic or business case for retaining SARP?
With recent changes to the international tax regime, it is now vital that key skills are located in Ireland and as a small country we need to import skills from other locations. While Ireland has a low CT rate, the personal tax rate at effectively 52% is very high and the SARP relief is an important tool to get people to relocate to Ireland to work in key areas. Attracting top class talent is high agenda item for all countries and Ireland needs to have SARP to create that incentive.
In the experience of your firm and your clients, how pragmatic is Revenue in terms of agreeing repayment schedules for warehoused tax debt?
To date we have found Revenue very approachable and helpful in agreeing the terms of payment for warehoused debt. Revenue have been pro-active in approaching taxpayers and in general are supportive of reasonable arrangement to pay the liabilities. The acid test will be keeping the repayments up to date and agreeing repayment in more difficult cases where the debts are higher or the business may be struggling to make profit. It will take 12-24 months to see what challenges will arise.
In terms of reducing their income tax burden, what tax incentives/breaks do you favour for your owner-manager and professional clients?
For owner-managed businesses, the CGT limit for Entrepreneur Relief should be upped from €1m to €2m.
One long-standing and annoying feature of our tax system is the close company surcharge of 15/20% on certain income unless the profits are distributed to the shareholders. This surcharge in the main applies to services of a professional nature that employ many people and require significant working capital; the ending of this surcharge would help to better capitalise these businesses and incentivise businesses grow, develop and increase their workforces.