Industry & Business

Ireland’s Tax System ‘Most Effective’ in EU, Says PwC Report

Ireland’s Tax System ‘Most Effective’ in EU, Says PwC Report

Ireland’s Tax System ‘Most Effective’ in EU, Says PwC Report
November 23
13:07 2016

A report by PwC and the World Bank Group, released on Tuesday, November 22, says that Ireland is the most effective country in the EU for paying business taxes, and the fifth most effective in the world.

The report, which covers 190 countries worldwide, found that Ireland’s tax system is the most efficient in the EU in terms of bureaucracy and administrative burden when it comes to paying, filing, time spent and the amount of tax levied on businesses.

The study uses a case study approach so that the same circumstances can be compared across a large number of companies. For many EU countries, the statutory headline rate is significantly higher than the effective rate. The survey demonstrates that Ireland’s statutory headline rate on profits is broadly similar to the effective rate. Taking labour and other taxes into account, Ireland’s total tax rate on corporate profits of 26% is much lower when compared with the EU average of 40.3%. Ireland has a low but clear rate of tax on corporate income of 12.5%. The report highlights that this is very close to Ireland’s ‘profit tax’ or effective tax rate of 12.4%.

Joe Tynan, Head of Tax at PwC Ireland said: “Over many years, the report has confirmed that Ireland’s 12.5% corporate tax rate is clear and simple. Having a simpler tax system with competitive business tax rates and a robust and transparent tax regime, gives Ireland a real advantage in the market for attracting direct investment. While no-one likes paying tax, the Irish tax system makes it relatively easy to comply with the rules and is much less bureaucratic system compared to other EU countries.”

New additional global research undertaken this year finds that the interactions between companies and tax authorities after a tax return has been filed can be some of the most challenging. The survey shows that Ireland scores well where filing is concerned. Economic analysis undertaken by PwC shows that where economies have taken action to reduce complexity in tax administration – both in terms of the number of payments and the time taken with tax matters – there has tended to be higher economic growth.

“Ireland’s transparent tax regime and low corporate tax rate together with the relative ease to pay tax is vital in continuing to position Ireland as a location of choice for foreign direct investment,” said Tynan. “This transparency and relative ease to pay taxes together with 72 treaties and world-class R&D tax credit system are important elements in providing us with an opportunity to help multinational corporations continue to establish operations in Ireland as well as expand their operations here.”

Top 10 rankings for the EU countries on ease of paying taxes are, in order: Ireland, Denmark, UK, Finland, San Marino, Latvia, Luxembourg, Switzerland, Netherlands and Estonia.

The top 10 worldwide economies for ease of paying taxes are, in order: Joint first: Qatar and United Arab Emirates, Hong Kong, Bahrain, Ireland, Kuwait, Denmark, Singapore, Macedonia and the United Kingdom.

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