Country will not benefit from new corporate tax system
Ireland would be among the key losers in any new European corporate tax regime, whereas France, a key promoter of the idea, would be a gainer, a new report has found.
The report by Ernst & Young says France would be among a group of countries growing its corporate tax base by at least 5pc, along with Belgium and Sweden. It says this is an "initial comparison'' and based on current rates.
French president Nicolas Sarkozy has talked about rates of corporation tax moving "closer rather than further apart''. Ireland's current rate of 12.5pc compares with France's 33pc and Germany's 30.2pc.
Ireland would be among the countries seeing their base reducing, says the report. The other countries would be Portugal, Poland, Finland, Bulgaria and the Czech Republic.
In March, Germany and France will seek agreement for a new "grand plan'' for Europe, including a new harmonised tax system known as the Common Consolidated Corporate Tax Base (CCCTB).
Under this system the tax bills of companies who have offices around Europe would be calculated centrally.
Whereas at present companies can funnel a large amount of their revenues through Ireland, even if the businesses are not based here.
The report, compiled for IBEC and the Irish Taxation Institute, claims the new system would actually increase compliance costs for companies, not lower them. The report says on average compliance costs could jump by 13pc.
"The majority of businesses found that their corporate income tax burden would increase under a CCCTB,'' says the report.
The report is based on interviews and case studies of companies likely to be impacted by the CCCTB.
"Overall the companies predicted that the total cost of complying with a CCCTB regime was an increase. This was due to the additional costs of preparing and filing the tax return and the associated tax administration, outweighing the expected savings in costs due to reduced need for transfer pricing,'' said the report.
"The greatest impact on internal hours was felt by the largest companies in the study. This was due to investments already made in optimising the compliance process,'' it added.
"A side effect of the CCCTB was to bring more activities in house, hence reducing external spend but increasing internal costs,'' concluded the report.