Ireland most efficient country for paying tax in EU

Ireland is the most efficient country in the EU for paying business taxes and the sixth most efficient in the world, according to a report by PricewaterhouseCoopers and the World Bank Group.

The report ranks countries according to their levels of bureaucracy for paying and filing taxes as well as the amount of tax levied on businesses.

Irish companies spend an average of 80 hours a year complying with the tax regime compared to 218 hours in Germany, according to the Paying Taxes 2015 report. This was the fourth lowest time in Europe, with the region recording an average of 176 hours.

The study finds that a typical Irish company spends two weeks dealing with its tax affairs and makes a tax payment almost every six weeks, compared with a global average of more than seven weeks dealing with tax affairs and a payment every two weeks.

Total rate

The "total tax rate" for Irish business, a measure that includes all taxes and social contribution charges made by employers, was calculated as 25.9 per cent in Ireland, which was the fourth lowest in the EU, where the average rate was 41 per cent. The lowest total tax rate in the EU was the 20.2 per cent found in Luxembourg.

The "top 10" global economies for ease of paying taxes were Qatar and the United Arab Emirates (joint first), Saudi Arabia, Hong Kong, Singapore, Ireland, Macedonia, Bahrain, Canada and Oman.

PwC Ireland head of tax Feargal O’Rourke said the report demonstrated that simpler tax systems and competitive business tax rates gave Ireland “a real advantage” for attracting foreign direct investment.

‘Relatively easy’

“While no one likes paying tax, the Irish tax system makes it relatively easy to comply with the rules and is a much less bureaucratic system compared to other EU countries.” Mr O’Rourke said the Revenue Commissioners had made “substantial advances” in areas such as electronic filing and payments.

The PwC / World Bank analysis found that the effective corporate tax rate in Ireland – the amount of tax paid as a percentage of profits – was 12.4 per cent, close to the statutory corporate tax rate of 12.5 per cent.

In some other EU countries, including the economic powerhouses of France and Germany, the effective rate was much lower than the statutory rate, while the lowest effective rate was in Luxembourg, where it was just 4.2 per cent.

Labour taxes paid by businesses in Ireland were also below both the global and EU averages, arriving at 12.1 per cent, compared to an EU average of 26.3 per cent and a global average of 16.3 per cent.