The Commission on Taxation Report

The Commission on Taxation report was published on 7th of September 2009. This comprehensive document outlines close to 250 recommendations. These recommendations are likely to have a significant impact on Irish taxation policy over the coming years. The recommendations cover a almost all areas of taxation and will have a significant impact on all taxpayers both in business and personal. The report does not advocate an overall increase in the levels of taxation but rather a broader and less volatile tax base. The Commission has recommended that the all proposals contained within the report be implemented over time.

The Commission underlined the commitment to the 12.5% rate of corporation taxation. The Commission also stated that Ireland should “keep taxes on labour income and the income tax wedge, low in order to reduce the cost of employment and to sustain and stimulate demand for labour”. However its is of great importance that any such changes are considered carefully and debated particularly within the current economic climate.
The Commission has outlined key recommendations within the following areas:

• Business Taxation
• Personal Taxation
• Retirement Savings
• Property
• Environmental Taxation
• Sundry Matters.

 

Business Taxation

The recommendations with regard to corporate taxation of business are broadly speaking positive in that they retain many of the key features of the corporate tax system which has made Ireland an attractive location for inward investment and propose some detailed enhancements which have been lobbied for over the last few years.

The following key recommendations were made:

Supporting Businesses

• Taxing corporate gains on capital gains on capital assets used for trading purposes at 12.5% and the re-introduction of inflation relief in calculating gains.
• The existing corporate tax holiday (a 3 year tax exemption on profits up to € 400,000 per year) for start up business should be extended to businesses starting up in 2010 and 2011.
• Preliminary tax payments should in time be based on prior year tax payments for all companies and this should be introduced on a phased basis.
• Changes to aspects of the regulatory framework which include a recommendation that the rate of interest on overdue tax take greater account of market interest rates.
• The proposed abolition of the patent exemption.
• The potential for increased costs of doing business (e.g an indiscriminate carbon tax; a multiplicity of local rates if not administered and spent on an efficient basis by local government).
• Imposing increased tax on transfers of businesses within families is a disincentive to the creation over many generations of large private companies that are the foundation of the Western European Economy.

Share Investment

• Stamp duty (Currently 1%) on the transfer of shares in an Irish incorporated company would be abolished.
• Income Tax on dividends paid on ordinary shares in trading company would be restricted to 25%

Tax Exemption for start up companies

• The “start up companies” relief from corporation tax is subject to a commencement order. The exemption is granted in respect of the profits of a new trade (commenced in 2009) and chargeable gains on the disposal of any assets used for the purposes of a new trade. Relief is granted where there the total amount of corporation tax payable by a company for an accounting period does not exceed € 40,000.

Balancing Charges on an Industrial Buildings

• Where a taxpayer disposes of a building on which it has claimed capital allowances, a balancing charge cannot arise where the disposal occurs outside the “relevant period” (variously 10-25 years).

 

 

Karl Foley

Press Officer
John McCarrick and Associates
11 Dunville Avenue, Rathmines
Telephone:01 4960102
Fax: 01 4973717
Email: info@jmccarrick.com

 

 

 

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