Ireland is easiest state in Europe to pay business taxes

IRELAND REMAINS the easiest country in Europe in which to pay business taxes, according to a new survey which also reveals that Ireland’s effective corporation tax rate is only marginally less than the EU average.

The 2012 survey, which ranks Ireland as the easiest country in the EU to pay taxes for the fifth year running, also marks out the country as being the fifth most user-friendly for business taxes globally.

“A lot of that has to do with the Revenue Commissioners making great strides in its online Ros system. It’s probably the single biggest issue that has propelled Ireland up the rankings,” says Feargal O’Rourke, head of tax with PricewaterhouseCoopers, which produced the report.

For Mr O’Rourke Ireland’s strong performance in the survey was an “important brick” in its foreign investment offering.

The survey also shows that Ireland’s statutory corporation tax rate of 12.5 per cent is some way behind the EU average of 21.8 per cent. However, when the effective rate is examined, which is the rate that companies actually pay, there is a differential of just 0.2 per cent, when Ireland’s rate of 11.9 per cent is compared to the EU average of 12.1 per cent.

Moreover, it highlights rates in competing jurisdictions as being far lower than that in Ireland, with France at 8.2 per cent, Estonia (8 per cent), Belgium (5.2 per cent) and Luxembourg (4.1 per cent), although the Irish rate is significantly behind the effective rate in the UK at 23.1 per cent.

“The French say the 12.5 per cent rate is way too low, but when you look at the effective rate they actually have a rate lower than us,” said Mr O’Rourke, adding that recent discussions on Ireland’s rate at EU level were a result of “competitive jealousy” over Ireland’s effectiveness at bringing in foreign investment.

The survey, which covers 183 countries, points to a downward trend of global tax rates, with eastern Europe and central Asia reporting the biggest reduction in tax rates.

In terms of total tax rate, which measures the burden of all taxes that a company must pay in relation to its commercial profit – ie profit taxes, property taxes, labour taxes etc – Ireland ranks 31st with a rate of 26.3 per cent. In part this is because tax depreciation is less generous in Ireland than in some other European economies.

Ireland ranks in 17th place globally for the number of tax payments with eight. This compares with just three in Hong Kong, at the top of the table, and, at the other end of the scale, Ukraine with 135.

Complying with profit tax, value added tax and labour taxes and contributions in Ireland takes only 76 hours a year or less than 10 working days, which compares favourably with Brazil, where it takes 2,600 hours.

The fastest reporting country is the United Arab Emirates, where it takes just 12 hours.