Brian Keegan: Next year could be our last chance to boost incentives for Irish firms before global tax hikes
For Public Michael Signing Donohoe At And Minster For This On The Of 2022 Reform Finance Expenditure Month Off Paschal Mcgrath Picture: Finance Budget Earlier Department Nolan Moya And Minister
The publication last Thursday of the Finance Bill went virtually unnoticed because of the disruption to the plans to ease Covid restrictions.
The annual Finance Bill sets out in law the budget statement of the Ministers for Finance and Public Expenditure and Reform presented on Budget Day in the previous week.
There were few surprises on Budget Day, so it was unlikely that there were going to be too many surprises in the Finance Bill.
This was not always the case; in the past, finance bills often included details of tax restrictions or incentives not mentioned in the budget statement.
For most of us, any budget changes won’t have effect until January and the start of the new tax year.
However, measures to counter aggressive tax abuse or avoidance were often kept a closely guarded secret until the Finance Bill was released; there was no such drama on Thursday.
Ministers will, with justification, point to the pandemic wage supports and business continuity supports put in as emergency measures in March 2020 and in some cases continuing well into 2022.
For many businesses, the extension of the Employer Wage Subsidy Scheme on Budget Day was critical, and anything else was just noise.
Yet the Government will point to a new tax regime for companies operating in the digital gaming industry, improvements in the Employment Investment Incentive (essentially tax savings for investing in some types of start-up businesses), and an extended corporation tax relief, also for new companies starting up.
Perhaps the content of this Finance Bill has been tempered by the huge effort put in both at the political and official level in dealing with the biggest tax issue in recent years, which is the international move towards a minimum effective corporation tax rate.
Just days before the budget, the government conceded that a 15% rate of corporation tax should apply to very large companies, and that some multinationals should pay more of their tax outside of this country.
In the same way as the Finance Bill fleshes out the detail of a budget statement, this new OECD sponsored multinational regime still has to be fleshed out in law.
Companies are the most popular commercial structure for Irish entrepreneurism and are the single largest category of employers.
For half a century, Irish economic policy has focused on a corporate friendly policy to deliver employment and spending power.
Next year's Finance Bill could well be our last opportunity to implement Irish corporation tax incentives before the international corporation tax regime is implemented in domestic law. That will happen in 2023, most likely.
Even though the new international corporation tax arrangements will only affect businesses with a global turnover of €750m or more, any form of domestic change after those arrangements become law in Ireland will be subject to international scrutiny and challenge greater than anything currently experienced.
Before this happens, we must reform how Irish services companies are taxed, as corporation tax policy up to now has prioritised the buying and selling of goods rather than the buying and selling of people’s time and expertise.
The policy reset of a 15% rate of corporation tax must be matched with a policy reset in favour of the services sector.
Next year's Finance Bill must not be so anodyne as this one.
- Brian Keegan is director of public policy at Chartered Accountants Ireland
