The post-Brexit drama and news updates continue hourly. Well reported in the media today is the proposal of the UK Chancellor, George Osborne, to set the lowest corporation tax rate of a major economy, by reducing the UK rate to 15%.
With the 12.5% corporation tax rate playing a huge part of Ireland’s economic strategy to woo foreign investment, a move like this is bound to catch our attention and once again stir debate.
We have had a great deal of success in attracting FDI to our shores. But Ireland’s tax regime still requires significant attention if it wishes to remain truly attractive over the long term, particularly in the face of growing global competition for talent and investment.
Chief among them is our personal tax system; namely our high marginal income tax rates, high capital gains tax rates, our tax treatment of share options and discriminatory tax treatment of the self-employed.
Although Ireland has one of the most progressive income tax systems in the OECD, our marginal rate is also amongst the highest of these. In addition, the level of income at which you become taxable at the marginal rate is amongst the lowest of OECD countries, meaning people pay the higher rate of income tax at a much lower earnings level. Our personal tax regime has even been described as a Tax on Talent.
These are unpredictable times for the UK. Whether or not a 15% corporation tax rate comes into force, or is effective in its aims, is entirely uncertain. But with FDI and the global war for talent so important to the Irish economy, it’s important that we keep revisiting our strategy and remain focused on the changes needed to support it. Our personal tax and capital tax systems must ensure there are strong incentives to work and invest in Ireland.
It is vital that a reduction in the personal tax burden stays on the agenda, to ensure we can continue to compete in attracting the best talent to Ireland in the face of growing global competition.