Changes to Ireland’s tax system ranging from personal tax to patent royalties and R&D tax credits need to be made urgently to ensure a steady flow of multinationals to the country, the American Chamber of Commerce in Ireland said in its pre-Budget submission.
“While Irish personal tax rates are comparable with most other developed countries, our infrastructural deficit combined with the high cost of housing does act as a deterrent,” Jim O’Hara, the head of the American Chamber and general manager of Intel in Ireland. “As a result key workers tend to favour other jurisdictions such as Switzerland or the UK.
“These individuals are often key influencers in the foreign direct investment decisions of multinational companies, so their loss to the Irish economy has major long-term consequences,” O’Hara said, adding that the chamber is seeking a system of tax reliefs specifically targeted at these key workers.
The chamber is also seeking a number of tax changes in areas such as patent royalties and intellectual property.
In particular, O’Hara said: “The Irish tax system has a number of features that militate against Ireland as a location for the exploitation of intellectual property.
“While outbound non-patent royalties do not suffer from Irish withholding tax, patent royalties are liable for this tax. Ireland’s competitiveness could be further improved by the abolition of withholding tax on patent royalties and it would place Ireland on a more equal footing with some of our key competitors.”
O’Hara also said the American Chamber of Commerce believes that the current R&D tax credit regime needs a major overhaul as it is not having the desired impact.
“We believe that all the options need to be examined and would welcome consultation between the Departments of Finance and Enterprise, Trade and Employment with a view to agreeing an effective solution that would stimulate and support greater investment in R&D.”
Other measures sought by the American Chamber in its pre-Budget submission include a reduction of tax on foreign dividends from the current 25pc to zero or at the very minimum 12.5pc, as well as the reinstatement of the ceiling on PRSI that employers have to pay.
By John Kennedy