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Why Irish eyes are smiling Print E-mail
Written by Dr Eamonn Butler   
Wednesday, 07 May 2008 06:03

Once again, Ireland seems to be the destination of choice for companies driven out of the UK by high taxes. Last week, reports Dominic White, WPP, Glaxo, International Power and AstraZeneca all hinted that they could follow Shire and United Business Media's plans to switch domicile to Ireland.

Why the rush? Well, Corporation tax is 30 percent in the UK, compared to just 12.5 percent in Ireland. After Alastair Darling's not-a-word-of-consultation attack on non-doms, many companies feel they just can't plan ahead under such a capricious regime. The Irish Development Agency has seized its chance and is actively courting UK decision-makers.

White might also have mentioned that Ireland is near. It's in the Euro area and part of the EU. There is no language barrier. Ireland has a well-educated, cultured population. It's green and pleasant (if a bit rainy in parts). The peace process has eroded the old national resentments and made the life and cultures of Ireland and the UK much more integrated.

With such stiff competition on its doorstep, why can't the UK government see what it must do?

Comments (2)Add Comment
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written by Mark Wadsworth, May 07, 2008
The 12.5% rate vs 30% rate isn't the important bit.

The key to this is that international groups already pay a load of corporation tax etc overseas. The actual location of the head office has little impact, what is relevant is that within Europe, only Ireland and the UK charge dividends from overseas countries to tax in full (most are 100% or 95% exempt). Both countries give credit for overseas tax paid, so a UK holding company pays additional tax if it receives dividends from a subsidiary in a country with an effective rate below 30%. An Irish holding company only pays more corp tax if it gets dividends from a country with a rate below 12.5% (which are few and far between).

According to HMRC figures, exempting overseas dividends (like all the other European countries) would only 'cost' £1 bn, i.e. pretty much bugger all in the grander scheme of things, bung in some additional taxes on head office salaries and we've broken even.

And then there's the UK's high occupancy costs - apparently office space in Manchester is as expensive as in Manhattan, a bit of liberalising the planning system might help there, methinks.

What is it with you right-wingers and corporation tax? It's VAT and Employer's NIC that are the real killers (which taken together raise about three times as much as corporation tax)!

I shall now shamelessly link to my summary international tax manifesto.
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written by Steve Giess, May 07, 2008
Quote: With such stiff competition on its doorstep, why can't the UK government see what it must do?

Presumably get the EU to legislate against such a tax differential? - as happened with VAT a few years ago.

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