Growth amid the turmoil

Barry Flanagan shares his thoughts on the European tax landscape, Brexit and US policy developments.

What are the best and worst aspects of your current role?

The best aspect is how rapidly we are growing and how transformative the last two years have been for our company. Immedis has only been officially in existence for one year since we spun out from the Taxback.com umbrella. From modest beginnings, the group has grown exponentially over the last five years. Automation and development of our proprietary software has been the most exciting development. Our new payroll portal is as close to disruptive tech the industry has seen in the last 10 years. Clearly, that level of growth also provides the biggest challenges. We now provide global mobility and international payroll solutions in 130 countries. Maintaining a reliable pool of international teams and talent is vital to that continued success and takes most of my focus.

What is your view of recent discussions regarding the tax landscape in Europe?

It could not be more confused. We have two competing paradigms vying for supremacy. As Michael Noonan said last year, Ireland cannot be the servant of two masters. Ultimately, the EU is going to have to decide whether to endorse the CCCTB or OECD model – we can’t have both. Tax has been politicised to a certain extent and this is unhelpful for everyone. The recent proposal, signed by 10 countries, to tax based on country-specific turnover is potentially the biggest change to the global landscape in decades.

Has the prospect of Brexit already impacted on global mobility?

Yes. We have seen a large increase in the number and complexity of the enquiries – especially those coming from UK-based firms considering international relocation. Comparative gross-to-nets for Ireland, Germany and Holland are a frequent request, as well as queries on employment law requirements and standard benefit packages. It is yet to puncture the numbers on assignment and we are still seeing healthy growth in new starts. Many seem to be adopting a wait-and-see approach, which is unsurprising given the lack of clarity around any of the issues.
 

With Brexit and US tax reform both on the agenda, what does the future hold?

US tax reform has been promised for well over a decade. Given the difficulties the Republican majorities are experiencing with repeal of Obamacare, is anyone expecting wholesale bipartisan reform to the tax code to sail through the Houses? Really there are three questions – how likely is it? What will it comprise of? And how will that impact us? In terms of likelihood, it depends on how aggressive the proposed changes are.

President Trump is yet to earn a reputation for consensus building, but recently did sign a deal with the Democrats on the debt ceiling so that may change. If no repeal/replace of Obamacare is achieved, tax reform may need to be watered down to ensure safe passage. Regarding the substance of the reform, the probability is that it will focus on repatriation of existing offshore funds rather than dis-incentivisation of foreign operations. In terms of impact on us, I am not sure it will be negative. US companies aren’t here solely for low tax rates. For Brexit, the only truism to date is that the more confident the prediction, the less informed the commentator. Until we know what will happen with the border and tariffs, all bets are off. And I wouldn’t bet against an interim arrangement that lasts in excess of 10 years.

What would you change about the Irish tax system if you had the opportunity?

In respect of legislation, we are moving in the right direction – but too slowly. SARP is too restrictive and the Knowledge Development Box has yet to catch fire. It is very easy to talk blithely about simplifying the tax code, but it is needed. Transparency is the main requirement for any system and this has been complicated here by the Apple ruling. Revenue has lost a lot of expertise in the last number of years and is working hard to replace this. If I could borrow from other jurisdictions, I would remodel SARP along the lines of the Dutch 30% rulings, and swipe the responsiveness and clarity offered by German tax offices to all queries.

Barry Flanagan ACA is Senior Tax Manager at Immedis.