Part of the reason for the success of the Celtic Tiger economy was that Ireland made it attractive to multi-national corporations to base their European Headquarters in the Republic through highly competitive rates of corporation tax. Irish corporation tax runs at 12.5% which compares very favourably with rates in other Eurozone nations and in the wider EU. The Irish have made it clear that low levels of corporate taxation are here to stay: "The 12.5% tax rate never has been and never will be up for discussion. The 12.5% tax rate is settled policy. It will not change," reiterated Michael Noonan, Irish finance minister.
However, a practice known as “Double Irish” which allows corporations to move profits from the Republic to jurisdictions considered to be tax havens is set to end. Effectively, this allowed corporations to pay only a fraction of the tax within Europe that they should have and was obviously a significant incentive in attracting businesses to Ireland. “Double Irish” will cease to accept new entrants in the New Year and will end completely by 2020. The scheme exploited differences in tax residency rules between individuals and companies. In the future, all corporations registered in Ireland will have to be tax resident in Ireland.
The announcement was made as Mr Noonan delivered the nation’s first post austerity budget, following on from its exiting conditions attached to the EU/IMF bailout that the country needed. It has been seven years since the last non-austerity budget. This budget saw a reduction of 1% to 40% for the top level of (personal!) tax and a hike to €33800 before it cuts in (this is a relatively low threshold for top band taxation). The reduced 9% level for VAT in the hospitality sector is to stay; it came in to boost tourism in 2011. The threshold for the Universal Social Charge, a bank bailout levy, will also rise.
Social welfare benefit recipients will see a “Christmas bonus” of 25% this year and child benefit payments will rise by €5 per month from January; single elderly citizens will also see a modest increase in monthly payments too.