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Latest News

Tax

With international tax reform progressing at unprecedented speed, Susan Kilty explains why Irish businesses must continue to participate actively in the discussion. With all the global uncertainty that Ireland is facing due to COVID-19 and Brexit, there is a risk that the OECD global tax reforms – the other major threat to Irish business and the economy – will be pushed further down the corporate agenda. But to do so would be very risky. Ireland must engage with this process now, at both the political and corporate level. The world of international tax is in a state of extreme flux as governments grapple with changes in the way multinationals do business. It is worth reiterating that Ireland has attracted healthy levels of foreign direct investment (FDI) over the past 30 years, and the multinational community has contributed significantly to our economic success. According to the OECD, Ireland received more foreign direct investment in the first half of this year than any other country. Along with Ireland’s near-iconic 12.5% tax rate, a crucial element in our continuing ability to attract international investment is the stability and transparency of the corporate tax regime here. Investors from abroad who establish activities in Ireland tend to be quite sensitive to changes in the taxation system. They like certainty and stability in a tax code, which is why Ireland presents such an attractive proposition. Ireland cannot afford to lose FDI as a result of turbulence in the global tax landscape at this time. As corporation tax accounts for almost 18% of Ireland’s total tax take, any change to the regime threatens to seriously undermine the attractiveness of our FDI model and negatively impact our revenue-raising ability. The crux of the matter is that we, and many other countries, apply 20th century tax systems to 21st century e-commerce business models. Businesses have an increasingly digital presence, and many no longer trade out of brick and mortar locations. This is not limited to so-called technology companies, but can be seen across industries and in businesses of all sizes. Businesses sell freely across borders without ever needing to set up operations abroad. This new digital way of trading is not always captured in our analogue tax rules, and the rules must be realigned with the reality of modern e-commerce. However, to tax a multinational business, you need a multinational set of rules. This is where the OECD comes in, but the uncertain shape that the new rules might take brings more uncertainty for businesses at a time when it is least needed. Many clients cite the changing international tax environment as one of the top threats to potential revenue growth. And although countries now face enormous bills for COVID-19, one sure thing is that BEPS, OECD and tax reform will not go away. International corporate tax reform is happening, and it will impact many businesses and our economy. Companies need to stay on top of these changes and prioritise the issues that will affect them. OECD proposals The OECD proposals offer a two-pillar solution: one pillar to re-allocate taxing rights and ensure that profits are recorded where sales take place, and a second pillar to ensure that a minimum tax rate is paid. At the time of writing, a public consultation is open for stakeholders to share their views with the OECD on the proposals that were recently summarised by way of two “blueprint” documents, one for each pillar. Pillar One seeks to give market jurisdictions increased taxing rights (and, therefore, increased taxable income and revenues). It aims to attribute a portion of the profits of certain multinational groups to the jurisdictions in which their customers are based. It does this by introducing a new formulaic allocation mechanism for profits while ensuring that limited risk distributors take a fair share of profits. Several questions remain as to how the Pillar One proposals, which constitute a significant change from the current rules, will be applied. Pillar Two, on the other hand, seeks to impose a floor for minimum tax rates across the globe. This proposal is very complicated. It is much more than a case of setting a minimum rate of tax. It is made up partially of a system that requires shareholders of companies that pay low or no tax to “tax back” the profits to ensure that they are subject to a minimum rate. At the same time, rules will apply to ensure that payments made to related parties in low-tax-paying or no-tax-paying countries are subject to a withholding tax. Finally, it can alter the application of double tax treaty relief for companies in low-tax-paying or no-tax-paying countries. Agreeing on the application and implementation of this pillar will be incredibly difficult from a global consensus point of view. Several supposed “safety nets” in Pillar Two are also likely to be of limited application. For example, assuming that the minimum tax rate is set at 12.5%, this does not mean that businesses subject to tax in Ireland will escape further tax. Similarly, assuming that the US GILTI (global intangible low-taxed income) rules are grandfathered in the OECD’s proposal, this does not mean that the US GILTI tax applies as a tax-in-kind tax for Pillar Two purposes. Pillar Two poses a significant threat to Ireland, as it reduces the competitiveness of our 12.5% rate to attract FDI and, coupled with the Pillar One profit re-allocations, could reduce our corporate tax take. The OECD estimates that once one or both of the pillars are introduced, companies will pay more tax overall at a global level, but where this tax falls is up for negotiation – and this is why early engagement by all stakeholders is critical. While the new proposals will undoubtedly have an impact, it is not certain that Ireland’s corporation tax receipts will fall off a cliff. Ireland has already gained significantly in terms of investment from the first phase of OECD tax reform, and this has helped to drive a significant increase in corporate tax revenue. But the risks must nevertheless be addressed. There is, of course, the risk that the redistribution of tax under the rules directly under Pillar One and indirectly via Pillar Two will impact our corporate tax take. But even if the rules have no impact on a company’s tax bill, they could still impose a considerable burden from an administrative perspective, and the complexity of the rules cannot be overestimated. At a time when businesses are grappling with other tax changes, led by the EU and domestic policy changes, this would be a substantial additional burden on the business community. The OECD is progressing the rules at unprecedented speed in terms of international tax reform. The momentum behind the process comes from a political desire for a fair tax system that works for modern business. However, does this rapidity risk the international political process marching ahead of the technical tax work? This is where Ireland, both government and corporate, needs to play a vital role. While the consultation period on both pillars is open, the focus for stakeholders should be on consulting with the OECD on the technical elements of its plan. Considering the OECD’s stated objective to have a political consensus by mid-2021, this could be one of the last opportunities for stakeholders to have a say in writing the rules. The interplay between the OECD and the US Treasury cannot be ignored when considering the OECD’s ability to get the proposals over the line. The US Treasury decided to step away from the consultation process with the OECD for a period in mid-2020. This, of course, raised questions around whether the OECD proposals could generate a solution that countries would be willing to implement. Added to this, the OECD has always positioned Pillar One and Pillar Two as an overall package of measures and has stressed that one pillar would not be able to move forward without the other. The “nothing is decided until everything is decided” basis of moving forward is a risky move, but the OECD recently rowed back on this stance. If the OECD fails to reach a political consensus by 2021, we could very well see the EU act ‘en bloc’ to introduce a tax on companies with “digital” activities. This could result in differing rules within, and outside of, the EU. It would also increase global trade tensions, all of which would not be good for our competitiveness. As a small open economy, Ireland will always be susceptible to any barriers to global trade. A multilateral deal brokered by the OECD therefore remains the best option – the last thing we want to see is the EU accelerating its own tax reform or, worse still, countries taking unilateral action. For the Irish Government, providing certainty where possible about the future direction of tax is critical. Where we have a lead is in how we provide that stability and guidance where we can. The upcoming Corporate Tax Roadmap from the Department of Finance will be an opportunity to give assurances in these uncertain times. Next steps for business The public consultation will be critical for businesses to have their say in shaping the rules. Ireland Inc. must continue to engage constructively with the OECD to try to shape the outcome so that we maintain a corporate tax system that is fit for purpose, is at the forefront of global standards, and works for businesses located here. Doing so would ensure that we articulate the position of small open economies like our own. Each impacted business must take the opportunity to comment on the proposals, as this may be the last chance to have a say. Indeed, what comes out of the consultation period may be the architecture of the rules for the future. We know that difficult decisions must be made at home and abroad in terms of the new tax landscape, and made with additional pressures we could not have foreseen 12 months ago. Although it may seem that much is out of our control, Irish businesses must continue to participate actively in the discussions and ensure that their concerns are heard. The game may be in the final quarter, but the ball is in our hands. Susan Kilty is a Partner at PwC Ireland and leads the firm’s tax practice. Point of view: Fergal O'Brien Since the start of the BEPS process in 2013, Irish business has recognised the importance of the work to our business model and the country’s future prosperity. At its core, BEPS has seen a further alignment of business substance and tax structures at a global level. This has resulted in an often under-appreciated surge in business investment, quality job creation and, ultimately, higher tax revenue for the Irish State. With its strong history as a successful location for foreign direct investment, and substance in world-class manufacturing and international services, Ireland was well-placed to benefit from the new global order. The boom in business investment, which last year reached over €3 billion every week, and increase in the corporate tax yield from €4 billion in 2013 to €11 billion in 2019, are evidence of the further embedding of business substance in the Irish economy. The current round of BEPS negotiations will have further significant implications for the Irish economy, and particularly for the rapidly growing digital economy. Ibec is working directly with the OECD to ensure that any further changes to corporation tax recognise the central role of business substance and locations of real value creation. Fergal O’Brien is Director of Policy and Public Affairs at Ibec.  Point of view: Norah Collender The OECD’s proposals to address the challenges of the digitalised economy will have a disproportionate negative impact on small, open exporter economies like Ireland. Earlier consultation papers issued by the OECD on taxing the digitalised economy suggested that smaller economies could benefit from international tax reform emanating from the OECD. However, the OECD now openly admits that bigger countries stand to benefit from its proposals more than smaller countries, and the carrot has turned into the stick in terms of what will happen if smaller countries do not support the OECD. Ireland is acutely aware of the dangers ahead if countries take unilateral action to achieve their vision of international tax reform. But that does not mean that countries like Ireland should be rushed into accepting international tax rules that fundamentally hamstring Irish taxing rights. Genuine consensus must be reached to ensure that international tax reform is sustainable in the long-term. Likewise, the new tax rules must be manageable from the multinational’s perspective and from the perspective of the tax authority tasked with administrating the rules. A rushed outcome to the important work of the OECD will make for tax laws that participating countries, tax authorities, and the all-important taxpayer may not be able to withstand in the long-term. Norah Collender is Professional Tax Leader at Chartered Accountants Ireland. Point of view: Seamus Coffey How Pillar One and Pillar Two of the OECD BEPS Project will ultimately impact Ireland is uncertain. One sure thing, however, is that there will be changes to tax payments. This will be a combination of a change in the location of where taxes are paid and perhaps also an increase in tax payments in some instances. But there will likely be both winners and losers. From an Irish perspective, there might have been some comfort in that the loser could have been the residual claimant – the country at the end of the chain that gets to claim taxing rights on the profits left after other countries have made their claim. As US companies are the largest source of Irish corporation tax revenue, it might have been felt that most of the losses would fall on the US. However, significant amounts of intellectual property have been on-shored here. Ireland, therefore, has become a residual claimant for the taxing rights to some of the profits of these companies. At present, Ireland is not collecting significant taxes from these profits as capital allowances are claimed. If BEPS results in a significant reallocation of these profits, we might never collect much tax on them. Seamus Coffey is a lecturer in the Department of Economics in University College Cork and former Chair of the Irish Fiscal Advisory Council.

Dec 01, 2020
Press release

31 January self-assessment filing deadline comes as further severe COVID-19 restrictions are implemented across UK A one-off, one-month extension to deadline would help industry to cope in these emergency times – Institute  7 January 2021 – Chartered Accountants Ireland has written to Chancellor of the Exchequer, The Rt. Hon Rishi Sunak MP, requesting that the government responds to the deteriorating COVID-19 situation by extending the tax deadline approaching for businesses at the end of the month. Chartered Accountants Ireland has over 4,500 members across Northern Ireland, and circa 2,500 members in GB who continue to be at the forefront of helping businesses navigate Government supports introduced as a result of COVID-19.  The pandemic has put increasing pressure on businesses in meeting regulatory and reporting obligations due to workplace health and safety requirements, staff resourcing, illness and childcare/caring constraints and the challenges of social distancing.  Chartered Accountants Ireland has been engaging with HMRC officials since last September, to highlight the difficulties businesses and accountants are experiencing in meeting the forthcoming self-assessment filing deadline of 31 January. Commenting, President of Chartered Accountants Ireland, Paul Henry said “The rampant nature of the virus in recent weeks necessitating a further severe lockdown in all regions of the UK introduces insurmountable obstacles to self-assessed businesses and individuals in their efforts to meet the forthcoming 2019/20 self-assessment filing deadline on 31 January 2021. “Since the outbreak of the pandemic, the swift implementation of the Government’s practical COVID-19 support measures has provided considerable support to businesses and taxpayers. It is crucial that businesses continue to be supported now that the situation has evolved so considerably in recent days and weeks.”  Chartered Accountants Ireland highlighted to the Chancellor that the regulatory workload of businesses is already at least two months behind normal schedules due to the national lockdown in 2020 and further restrictions across the various regions introduced from October onwards.  Henry continued “Although accountants will make every effort to ensure that as many tax returns as possible are filed on time for businesses, due to the extraordinary circumstances of the pandemic, there will be instances where it is just not practically possible to make the deadline.  “A short once-off extension of one month to the self-assessment deadline would help ease the pressures on businesses who have the necessary information for the preparation of their return but cannot safely provide this to their accountant due to the ongoing public health restrictions.”  ENDS

Jan 07, 2021

About Irina Irina Yotova started out with a degree in Hospitality Management, and worked for several years in senior operations roles in a number of large hotels. Budgets and numbers became a part of these roles and a part she really loved. She trained as an Accounting Technician while working, and soon decided she wouldn't stop there. Irina has recently become our 29,000th member and is delighted with her career choice. We recently chatted with her to find out more about her journey and her advice for others considering making a change. Background and journey I completed a degree in Hospitality Management and spent over 10 years in various roles in hospitality operations and senior management. This gave me the opportunity to engage with finance, including setting annual budgets,  weekly forecasts and analysing and managing actual results. These financial areas became important parts of my daily duties which I have to admit I really enjoyed! I have always had a keen interest and love for numbers, having excelled at maths in high school. So with this passion and my growing experience at work, I joined the cluster finance team which at that time was responsible for the finance and accounting of five hotels.  Production of monthly management and financial set of accounts and cost control were only a fraction of my duties, at which point I felt that pursuing a career in accounting is what I wanted to do. I became an Accounting Technician within a year and at that stage, I knew that becoming a Chartered Accountant was my next goal, so embarked on the Flexible Route. I chose the Flexible Route as it suited my personal and professional life as a mature student. My job involved travel within the island, which prevented me from attending lectures at times. The online materials, the support available to all students and the professional network I created helped me achieve my goal – becoming a Chartered accountant.   What the next years may hold  I currently work as an Auditor at the Office of the Comptroller and Auditor General, responsible for carrying out value for money examinations of various government departments and offices and report the results in annual chapters and special reports.  I joined the Office when I commenced studying for my Chartered Accountancy qualification.  Given the fact that the world is changing at such a rapid pace nowadays, who knows where I will be in the next five years.  A lesson learnt from the pandemic is that now, more than ever, we need to be adaptable, to embrace change and to think and act quickly. I see myself continuing to progress my career in the OCAG and I am enjoying the endless opportunities the Chartered Accountancy qualification presents me with. I would like to study again at some stage in the future.  What advice would you give to someone considering accountancy? I won’t lie. It was not easy – but no one said it would be… The rewards and opportunities that go with the Chartered qualification are endless. If I had to do it again, I would not think twice.  It’s worth the effort. What are your top tips on studying and exams that you would give to future students? Take your time and do not stress. Try to stay on top of all subjects. It's easy to focus on the subjects we like most, so be careful not to neglect others. Good preparation and planning are the keys to success. Make sure to find time to enjoy yourself and do not give up on your hobbies while you are studying. Keep your eye on the prize! As Sills once said “There are no shortcuts to any place worth going". What skills from your former qualification and experience have helped you along the way? My hospitality management roles and qualification taught me organisational skills, leadership, open-mindedness, prioritisation and delivery of results. These are all fundamental in accountancy too, of course, so I feel lucky to have taken the journey I did.  Every type of experience is always an asset.  I think having worked with such a wide variety of people allowed me to gain a broad spectrum of experience in many aspects and broadened my business acumen. 

Jan 06, 2021