View from the top of the Irish Tax Institute

As the music of political sentiment moves towards ever-higher taxation of entrepreneurs and employers, says Colm Brown of the Irish Taxation Institute Emily Stiles why the tax base should be broadened

Colm Brown was inaugurated as The Irish Tax Institute 47th President in 2022. He is a tax director at PwC and heads a centralized corporate tax compliance function for PwC in Kilkenny.

He trained and qualified as a Chartered Tax Adviser at PwC in Dublin, progressing to the role of Tax Manager before moving to Limerick to work with BDO. He joined OBI, a smaller practice, where he was a partner for about ten years. Brown rejoined PwC in 2018.

The institute made a number of recommendations in its submission to the Taxation and Welfare Committee. Which recommendations do you think have the highest priority?

A central theme of our presentation was competitiveness, and with the global minimum corporate tax rate on the horizon, we said it was essential to find other ways to make our tax system attractive to foreign investment. We have recommended that the R&D tax credit be improved and continuously benchmarked against key competing jurisdictions to ensure it is best in class for our SME sector as well as multinationals.

We have also called for a reduction in the marginal cost of employment in Ireland for both businesses and individuals. And we have called for the simplification of our corporate tax code. Clear, simple and effective business taxes could be a real difference to Ireland. Simplification would make doing business in Ireland easier and more attractive. It would also increase compliance and create confidence in the system among taxpayers.

How vexing is tax compliance for taxpayers?

Global and EU reforms over the past five years have made tax compliance very onerous for businesses of all sizes. Simplifying the reporting burden will help Ireland be seen as an easier place to do business.

One area where progress can be made is in pre-populating forms from the vast amount of data Revenue have at their fingertips. This can help eliminate many administrative headaches. Revenue has already begun to do this, but more can be done.

Some of the business tax breaks need reform to make them more SME friendly. With the R&D tax credit, smaller businesses are often afraid to make claims in case a follow-up review results in a refund.

The institute suggested having a pre-approval process for small and micro businesses so that there is some assurance that they meet the criteria beforehand.

Paying off accumulated tax debt will be a challenge for many companies. What is the feedback from ITI members on Revenue’s approach to this issue?

We are undoubtedly entering the most difficult phase of the repayment process as we go from 0% to 3% interest rate on the stored tax debt at the end of the year. To be fair, Revenue has said they will take a pragmatic approach and we will ask that the impact of the current very difficult economic environment on our SME sector be taken into account.

It is important that we are able to put in place appropriate, realistic phased payment arrangements so that businesses can weather this storm. Some inevitably won’t, but companies that have been profitable and compliant should be given a fighting chance.

International tax reform, which would raise Ireland’s corporate tax rate to 15%, appears to have stalled. Why does CT rate uncertainty matter to Ireland Inc?

Security is everything in business. If companies have security, they will adapt. Regardless of what happens with the Framework Agreement, I think it is likely that the 15% rate will be applied at EU level. It is not yet clear whether the US will join him, but there is still something to play for.

Obviously we have to bear in mind that Ireland retains its basic rate of 12.5% ​​for our SMEs and that a rate of 15% only applies where turnover is above the €750 million band.

Why does the Institute believe that the capital gains tax rate should be reduced from 33% to 25%?

In order to reward and incentivize business risk takers, CGT should be revisited and used as a competitive lever to attract talent and investment, both local and foreign. At 33%, Ireland has one of the highest CGT rates among our competitors and we believe that reducing the rate to 25% for active business assets could significantly increase yields for the Exchequer.

What is the Institute’s view on income tax?

Our personal tax system is an important factor in Ireland’s competitiveness and effective personal tax rates on average wages and above are high by international standards. Successive governments have used the personal tax regime to redistribute income to lower-paid workers, leaving the system overly dependent on higher-paid workers, many of whom work in the multinational sector.

In 2021, 25% of earners paid 83% of total income tax and USC collected, and foreign multinationals accounted for 32% of employment and 49% of employment taxes in 2019.

A broader personal tax base, where all taxpayers contribute according to their means, would bring Ireland on a par with other European countries whose systems are often held up as examples.

More generally, a broader tax base would correct the current overreliance on economically regressive taxes on labor and tip the balance in favor of indirect taxes, such as environmental charges, which would also help decarbonize our economy.

Is the current productivity of institute-trained tax professionals sufficient for employers’ requirements?

The Institute’s throughput reflects the intake of graduates from member firms and we work hand-in-hand with employer firms to promote careers in tax and meet their training needs.

There are many opportunities for qualified tax advisers in industry, the public service and of course across all our member firms. Taxes are constantly changing and the skills of a tax advisor are in demand. They are also alert to keep abreast of developments in this fast-growing sector.