Tax breaks such as the patent box and a 20% corporation tax rate by 2015 could see the UK challenge Ireland for foreign investment.
A recent Financial Times article reported concerns from Irish tax and business leaders that more companies might follow the examples of WPP and UBM and relocate their global headquarters to London.
“I am seeing a lot more boots on the ground in the US from UK investment agencies and professional firms pushing Britain as a location for investment,” PwC Dublin tax partner Ferghal O’ Rourke told the FT.
The UK has always been one of Ireland’s main competitors for investment, according to spokesperson for IDA Ireland, the country’s investment agency.
“Ireland fights hard to win foreign direct investment in a number of sectors – the UK is one of our main competitors for this business,” he said.
“Companies tend to locate in Ireland for a combination of reasons including talent, technology, track record and tax.”
Sally Jones, tax director at Deloitte, said however that while Ireland’s 12.5% corporation tax rate may be attractive to foreign investors, the UK may have more to offer. Ireland also has a higher personal tax rate.
“If you are thinking in tax terms, the tax base as well as the tax rate is more important. The UK doesn’t need to decrease their corporation tax to Ireland’s levels. We have a larger economy and other features that make us more attractive,” she said.
CIOT president Patrick Stevens agreed: “I’m sure the UK didn’t alter their tax regime to be in a position to compete with Ireland, but rather to make the country a bigger attraction in itself.
“If you’re trying to attract, say a US corporate base into London or Dublin, London is more attractive as it’s a global financial hub.”
The patent box regime, amongst other technical and creative tax breaks announced in the Finance Bill will also play a part in attracting technical investment, he said, something Ireland does well.
On the potential reputational threat to multi-nationals from tax avoidance campaigners, Stevens accepted it would have an effect on foreign investment, but wouldn’t discourage it altogether.
“Companies are acting completely within the law, but they’re being told, no, you’re doing the wrong thing. But the UK are working on that and our image should improve.”
