Ireland boasts Europe's most effective corporate tax system

A new study from PricewaterhouseCoopers (PwC) and the World Bank regards Ireland to have the most effective corporate tax system in Europe.

In terms of bureaucracy and administration, the Republic is said to have the least amount of red tape, while its effective corporation tax rate comes in just 0.1 per cent below the Government’s 12.5 per cent advertised rate.

That compares favourably with France, whose headline rate is 33 per cent, although the effective rate is closer to 7.5 per cent.

The ‘Paying Taxes 2015’ survey demonstrates that Irish-based companies spend 80 hours a year on average in complying with the tax regime, compared with an average of 218 hours for German-based firms.

The report also reveals the average Irish firm spends almost half of its commercial profit in taxes, spends a fortnight dealing with its tax affairs and submits tax payments once every six weeks.

‘Paying Taxes 2015’ was borne out of plans to revisit the common consolidated corporate tax base within Europe’s political agenda.

The concept of a common formula used for calculating taxes on firms across Europe was first discussed more than a decade ago, but the recent ‘Luxleaks’ controversy has sparked recent debate once again.

Fergal O’Rourke, head of tax at PwC, said: “The survey demonstrates that, having simpler tax systems with competitive business tax rates and a robust and transparent tax regime, gives Ireland a real advantage in the market for attracting direct investment.

“The survey confirms that Ireland’s tax system is the most effective and straightforward in the EU.

“While no-one likes paying tax, the Irish tax system makes it relatively easy to comply with the rules and is a much less bureaucratic system compared to other EU countries.”

In terms of overall tax costs, Ireland ranks fourth in the EU, with a rate of 25.9 per cent compared to the lowest rate of 20.2 per cent in Luxembourg.

Date published 25 Nov 2014 | Last updated 25 Nov 2014