“Difficult” to assess the cost of the new agreement on corporate tax

It remains very difficult to accurately estimate the financial impact on Ireland’s decision to join the global agreement on corporate tax reform, the Tax Strategy Group (TSG) said today.

In a document examining the question of corporation tax, the group specifies that the current estimate of the cost is of the order of 2 billion euros per year.

He says there are still many loose ends in the complex international agreements negotiated by the Organization for Economic Co-operation and Development (OECD).

These include sensitive issues for Ireland which are progressing but have not yet been finalised.

“The outcome of these discussions, coupled with future business decisions by multinationals, will have significant implications for our future corporate tax revenues, and the magnitude of the effect will only be fully known over time,” the report said. of the group.

Overall, however, the analysis indicates that Ireland will continue to be proactive internationally and domestically to ensure that the corporate tax system remains competitive and continues to contribute to jobs and growth. economical, while respecting recently agreed international tax requirements. standards.

“Our goal is to provide an attractive, stable and transparent TC regime, provide certainty for business here and allow us to continue to attract real, substantial investment into the state,” he says.

The group says that the work of transposition of the proposal for a European directive on minimum tax which will finally give effect to the plan to implement a minimum corporate tax rate of 15% is in progress and will continue for the 15 months preceding the publication of the 2023 finance bill.

The directive must be implemented by December 31, 2023, in accordance with the OECD agreement, although the document says it is not expected to be signed by member states before the end of this year.

The paper also examines the issue of the concentration of 53% of all corporate tax revenue among the top ten payers.

It says the increased concentration in recent years is “a matter of concern in considering longer-term sustainability” and will require careful and continued monitoring.

But the TSG also finds that concentration might be expected to moderate this year as public health restrictions related to Covid-19 are eased and small and medium-sized businesses return to profitability.

The report also analyzes the Section 481 tax relief available for film productions here and notes that the Department of Finance is currently undertaking a cost-benefit analysis of it.

The relief is due to cease at the end of December 2024.

The group’s report states that while the decision whether or not to extend it is usually made during the year, it must cease, due to the long planning period required for such productions, the possibility of a decision this year. or next year can be considered in order to provide certainty.

Last year, the value of the relief was 98 million euros, compared to 113.8 million euros the previous year.

Animation represented 33% of certified productions in 2019, compared to 32% in 2020 and 29% in 2021.

The number of certified feature films fell sharply from 37 in 2019 to 18 in 2020 due to the impact of Covid restrictions introduced in 2020, but rose again to 27 last year.

“This trend is also evident when analyzing the total number of certified productions, with 120 certifications issued in 2019,” he says.

“This figure fell to 95 in 2020, before increasing to 112 in 2021, a figure comparable to pre-pandemic levels in 2019,” he adds.

On the issue of the research and development tax credit, the report says that as priorities return to normal post-pandemic, officials are considering options for advancing policy in this area.

These include options for alternative methods of support that take into account significant changes in the wider economy since the measure was originally announced.

The document indicates that the cost of the R&D tax credit has increased since its introduction in 2004 and, due to the nature of project-based R&D activities, there may be year-to-year fluctuations in the overall cost of credit.

“The cost of aid peaked in 2015, at 708 million euros with 1,535 claims,” he says.

“The latest figures for the cost of credit are from 2020, where the cost was 658 million euros with 1,616 claims. The cost is expected to increase again in the coming years”, adds – he.

The report also notes that the knowledge development box is currently under review

It says options for its future include extending it at the current effective tax rate of 6.25%, extending it but increasing the effective tax rate to 9% or more, or suspending it.

Regarding the new Digital Gaming Tax Credit, the TSG says a number of minor technical changes to the proposed legislation will be required in the Finance Bill to ensure it complies with the rules of the EU on state aid.

Luisa D. Fuller