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Brexit implications for Ireland - leading tax advisers provide a 'Plan B' strategy for Ireland to steady the ship after 'Brexit' vote Back
A group of leading advisers suggest that in the event of a “leave” decision, Ireland should work quickly to reassure international investors that Ireland remains an attractive location from a tax perspective.
In a Roundtable Survey, published in the June edition of the Irish Tax Monitor in Finance Dublin magazine, a panel of five leading corporate tax advisers look at the possible Plan Bs, which Ireland should implement in the first 100 days of a Brexit to “steady the ship” and to reassure international investors in Ireland. This issue is of critical importance to the stability of Exchequer revenues, as 10 companies account for 41% of all corporation tax and 80% of all corporation tax is paid by foreign owned multinational corporations. The panel members included Louise Kelly, Deloitte; Jim McDonnell at PwC, Sonya Manzor at William Fry, and Noirin Cahalane, and Ken Killoran of Mazars.

Brexit and Ireland
The panel were asked to respond to the following question:

The upcoming referendum on 23 June may lead to a UK exit from the EU. Should Ireland have a fiscal Plan B for such an eventuality and what should it contain? What should we be doing in the first 100 days of a “Leave” decision to reassure international investors in Ireland from a tax perspective?

Louise Kelly said that from an Irish perspective, a potential Brexit could have significant economic implications, so it is important that Ireland has a fiscal plan in place should a Brexit happen. The key areas, according to a November 2015 ESRI report, that will impact Ireland in the event of a Brexit are linked to trade, foreign direct investment, energy and migration. The fiscal effect of each of these implications should be carefully considered and incorporated into a fiscal Plan B for Ireland in the event of a Brexit. In the event of a leave decision Ireland should work quickly to reassure international investors that Ireland remains an attractive location from a tax perspective.
Louise Kelly, Partner, Deloitte

In the wake of a Brexit, Ireland could potentially gain FDI projects as the European hubs for global groups and Ireland should be in a position to compete immediately for any such groups wanting hubs within the EU. Ireland should strongly promote its competitive tax regime to highlight to international investors that Ireland remains open for business and continues to be an attractive location for international investors post-Brexit.
Ireland has had a very consistently attractive and transparent tax regime built on substance, with a long standing commitment to the 12.5% tax rate.

Jim McDonnell at PwC said that Ireland's specific response to a Brexit will evolve as the details of the outcome of negotiations between the UK and the EU become apparent - something that will not happen for some time after the referendum, given that the Treaty of Lisbon provides for a 2 year negotiation period - and longer if agreed by EU member states.

The UK has already been competing more aggressively, not only with Ireland but with other EU states with attractive corporate tax regimes. Ireland needs to respond to this by continuing to enhance its tax offering on a number of fronts - personal tax for inbound assignees (SARP), R&D tax credits, K&DB regime, the limited partnership legislation for investment platforms, etc.
Sonya Manzor Partner, at William Fry

Ireland must also be careful on how it implements certain elements of the BEPS and EU Anti-Tax Avoidance Directive, at least to ensure that Ireland remains competitive with other locations in Europe (including the UK) and further afield. (For more on the implications - including on Financial Services in Ireland see this publication by PwC).

Mazars' Ken Killoran said that Ireland should have a fiscal Plan B that is focussed on the UK exiting the EU. Should the UK exit, then Ireland should monitor and participate in negotiations between the UK and the EU in relation to the model adopted around exit.

Will this lead to either an EEA or EFTA type model with the UK, or how will future bilateral trade between the UK and the EU take place?

Consideration could be given to applying a cash basis to the taxation of cross border trade with the UK for the first 12 months following Brexit, for Irish companies with significant UK trade based on set criteria.

The second 12 months following Brexit would of course need to be adjusted to ensure that the 2 periods together reflect for tax purposes the amounts flowing through the financial statements. Where possible, within constraints around harmful tax competition, measures introduced in the UK to attract or retain FDI could be replicated in Ireland.

Sonya Manzor at William Fry said that the problem with Brexit is uncertainty and the full impact of a vote for Brexit will not become clear for some time (likely to be several years). Undoubtedly a Brexit will have many UK based companies considering how to pursue an EU focussed strategy from outside the EU. From Ireland's perspective, ensuring that we continue to enhance our attractiveness for inward investment will be hugely important, while also ensuring that negotiations and agreement on our future relationship with the UK are concluded as early as possible.
Mazars' Nóirín Cahalane

The need to reassure investors was critical in light of the fact that 80% of all corporation tax is paid by foreign owned multinational corporations according to Noirin Cahalane of Mazars.
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