We continue to read news headlines on Brexit on a daily basis and the implications for the Irish economy and the various sectors of the economy. Unfortunately many of those headlines are reporting the potential negative impact of Brexit. The Minister acknowledged in the Budget that SMEs will need to innovate and look to new European and international markets and in this regard he announced a Brexit Loan Scheme to assist SMEs with working capital needs and to give such businesses time to put in place the required changes to help their business grow in the future.
There have been a number of financial services companies that have announced that they intend to locate in Ireland or expand operations, including JP Morgan, Bank of America, Barclays, TD Bank, Beazley, Chaucer, Standard Life and Legal & General. However the competition is fierce and there have been a number of high profile financial services groups that have chosen other European locations such as Frankfurt, Paris or Luxembourg. While at this stage many companies have made their decision on where they intend to locate, there are a number of companies that are still considering the matter. Also international tax changes in the context of BEPS (including transfer pricing) and the ATAD mean that now more so than ever there is an increased focus on having the appropriate people and substance located in country. Therefore it is important that Ireland’s tax strategy is formulated so that the regime is competitive and provides incentives for businesses to locate in Ireland.
Businesses require as much as possible stability and certainty in tax policy and therefore while there may not be significant room, given budgetary constraints, to introduce new incentives, at a minimum we should be aiming to maintain those principles. Given this it was positive to hear the Minister for Finance state that certainty is important in forming tax policy and the country’s tax strategy. Also, in that context it was positive to hear the Minister for Finance reaffirm the government’s commitment to maintaining the 12.5% rate of tax, as he confirmed that the 12.5% rate remains a core part of Ireland tax offering. The Minister also announced a public consultation phase in respect of the review of Ireland’s corporation tax code and in particular following the recent publication of the Coffey report on the matter.
When companies are considering relocating, for example from the UK or alternatively where they are considering new investment or expansion, countries are compared across a matrix under a number of different factors. Regulation, the regulatory regime and the local regulator’s approach is often a critical factor for financial services companies when they make a decision on where to locate. Other factors are also important including tax and therefore it is important that the government is constantly monitoring how Ireland scores on the matrix of relevant factors, when compared with the other competing countries and whether there is more we can do, or what changes should be considered in respect of the factors where we don’t score as well as we should.