Note to Dept of Finance Regarding Corporations and Capital Gains Taxes
On Friday the 23rd of July, ISME has written to the Finance Minister Paschal Donohoe concerning Ireland’s Corporation Tax rate of 12.5%, and plans by the OECD to adopt a global minimum rate of 15%.
While we are in agreement with Minister Donohoe on Ireland’s historical defence of our low CT rate, Ireland has had a long-standing position of advocating an OECD position on CT. If the OECD is moving to a standardised global minimum rate, we believe it is inevitable that Ireland must fall in line with it.
However, we also believe that setting a 15% global CT rate will be pointless unless there is also agreement on what are fair deductions allowable against it. In view of the inevitability of the increase in our CT rate, we believe Budget 2022 is an opportunity to review Ireland’s unrealistically high rate of Capital Gains Tax (CGT). Ireland’s CGT is one of the highest in the world at 33%, which results in the Exchequer yielding far less than could be available from this tax head. We believe CGT should be reduced to 25% in Budget 2022, and should be applied to productive assets only.
There should also be reduced rates of CGT for assets and businesses held for longer periods of time, and indexation of assets should be permitted. At a time when Ireland’s borrowing has reached worrying levels, a reduction in CGT would produce a permanent uplift in yield from this tax head.
To read the full letter sent by ISME CEO Neil McDonnell click here: