David Smyth, Head of Tax Services, Ernst & Young Ireland

Ernst & Young tax professionals have analysed Finance Bill 2007, spent time debating the detail amongst themselves, with Revenue and other interested parties and shared its insights at the  Spring Tax Forum that was held in Dublin on Wednesday. The Forum focused in detail on the most pressing tax issues affecting Irish businesses today, including the impact of Finance Bill 2007.

Donal O’Sullivan, Partner, Corporate Tax Services

This Finance Bill has done little to improve Ireland’s tax competitiveness.  There have been improvements to the R&D tax credit system and welcome developments to allow Irish companies to pool the tax paid by foreign branches.  However, these changes fall significantly short of keeping the Irish regime competitive relative to the systems available overseas.   Ireland has a proven track record in using tax incentives in attracting high-quality foreign investment to Ireland.  A long-term tax strategy which will retain Ireland as the domicile of choice for multi-national operations is urgently required. 

Breen Cassidy, Partner, Indirect Tax Services

Even though the proposed overhaul of VAT and property legislation will not come into law until 1 January 2009 it is vital that any taxpayer currently entering into a property transaction considers the effect of the proposed legislation as it may impact on future transactions concerning that property.

I would advise taxpayers to review their existing property portfolios to consider how the proposed legislation may affect them.

Jonathan Fox, Head of International Tax Services, Ernst & Young New York and London

"Tax authorities around the world have been “playing catch-up” on information exchange to enhance their knowledge of taxpayers’ affairs -- especially when it came to complex cross-border transactions. They had been very slow to focus their attention on international tax planning techniques and, for the most part, undertook a piecemeal or “local” approach to raising enquiries. However, that is changing and many governments, having looked closely at the revenue loss, have widened their horizon with regard to information sources; also, there has been a significant improvement in the informal exchange of information through organizations such as JITSIC, etc.  They see that the “return” on investment in the form of tax revenue is significantly greater than anticipated and this will only lead to more jurisdictions investing in the recruitment of more agents and better access to data. Globally, tax authorities are dragging themselves into the twenty-first century!

Meanwhile, all over the world, tax directors have become more concerned about compliance, in the wake of section 404 and Sarbanes Oxley; this is no longer just a US phenomenon. Ironically, as corporates allocate more resources to “tax risk”, Governments around the world are spending their limited resources in challenging and legislating against tax “products” – i.e. through disclosure or anti-abuse legislation. The effect of this would seem to result in a move away from “tax planning” but, as the global economies continue to grow, so the need for tax effective structuring continues and the focus becomes one shaped by business drivers rather than pure tax mitigation".

Declan O’Neill, Partner, Corporate Tax Services

While some of the changes announced in the Finance Bill will be welcomed by business, we need to be doing a lot more in order to remain an attractive location for inward investment. In the face of serious competition from alternative locations such as the Netherlands and Luxembourg, we need to consider our entire suite of incentives and ensure that we at least match the range of benefits which are available elsewhere.

In particular, we should consider an expansion of our participation exemption regime and an abolition of our withholding tax rules on interest and royalties, as well as broadening the tax benefits of our R&D regime. Some of the changes introduced in the Bill are little more than a tinkering around the edges of what is required, and we could be faced with further high profile relocations out of Ireland if we don't remain competitive on the taxation front.