Among US and UK tax reforms, Ireland is ‘still in the game’ says PwC

Ireland has observed 60 years of a stable tax policy – aimed to give good return on investment for both manufacturers and foreign direct investment – and it has worked, PricewaterhouseCoopers Ireland’s representative told delegates at the BioPharma Ambition Conference last week in Dublin.

The Republic of Ireland’s corporate tax rate stands at 12.5% and averaged 28.21% between 1981 and 2018.

The consultant – who specialises in the pharmaceutical and life sciences sector – said when advising investment, she is looking for a low, effective tax rate that is sustainable.

“A low, effective tax rate that allows you to make the investment efficiently, get a good rate on the profits while you’re making them, make it attractive to reinvest those profits in the country, and if you have to dismantle a structure, or move intellectual property [IP], make sure that that’s not too painful from a tax perspective.”​

According to Delaney, the “pace of change over the past five years has increased enormously,” ​which she told delegates is best illustrated by December’s US tax reform​.

The passing of the Tax Cuts and Jobs Act of 2017 – the first major US reform since 1986 – reduced the corporate tax rate from 35% to a flat 21%. 

Delaney said the substantial rate reduction was a “shock to the system,” ​but had to happen.

“They [the US] cannot be dismissed from the table purely on tax reasons anymore.”​

Brexit has “changed the dynamic”​

The UK’s decreased corporate tax rate also makes it a major contender for pharmaceutical investment.

The UK began the process of moving to a low tax rate a number of years ago: It’s currently at 19% and is committed to get to 17% by 2020, said Delaney.

The fact that 17% is not far off Ireland’s 12.5%, teamed with its bigger economy, may be used by the UK to try to swing investment their way, she told delegates.

However, despite its low rate, and substantial economy, the consultant said the UK’s impending withdrawal from the EU may affect investment decisions.

“While Brexit hasn’t changed the tax rate, it has changed the dynamic.”​

“They [the UK] will feature in the conversation, but I think the whole question of EU membership is the thing they are going to have to handle.”​

The ‘well positioned’ Green Isle​

According to the PwC executive, Ireland – particularly in comparison to the US – is still well positioned on the tax front.

“That’s a differential that is still worth talking about.”​

“The differential that is going to get you to the table every single time this conversation comes up, because anybody preparing a brief on investment needs to look at all the options,” ​she added, likening tax investment decision to the World Cup.

“It’s a funny year when Germany and Brazil don’t make it at least to the semi-finals, and I would argue strongly that Ireland is at least a semi-finalist still.”​

“It’s only when you’re a semi-finalist that you stand any chance of getting to the final…and if you don’t get to the final, you have absolutely no chance of winning.”​