IN an attempt to secure continued investment from major multinationals, the Government has outlined its plans for the corporate tax structure until the year 2025.
The new 12.5 per cent rate is to be introduced by 2011 for firms now on the 10 per cent rate and by 2006 for all other firms, the Government confirmed yesterday, adding a guarantee that the new rate would stand for at least a further 15 years.
The official plans - contained in the employment strategy document published yesterday - confirmed that a new 25 per cent rate will be charged on so-called passive income, such as income from rents and other non-trading income. Civil servants will now, complete plans for moving towards the new structure, which is likely to involve gradual annual reductions in the standard 36 per cent corporate tax rate.
The document says the Government is determined to maintain the overall tax yield from business. Measures are to be examined to claw back some of the gains from companies which will gain substantially from a reduction in taxes, particularly banks and other financial institutions.
The committee will also examine the removal of tax credits attaching to dividend income. The plan is to move to a system under which dividend income is subject to full person tax rates, in addition to the tax paid at company level.
Among the other areas to be examined are measures to ensure that individuals do not abuse the new corporation tax rates as a way to avoid income tax, and a withholding tax on dividends to resident shareholders. "A significant curtailment of the various business reliefs, including the Business Expansion scheme and other investment incentive tax reliefs," is also promised.
The social partner will be consulted on the plan, according to the Government. Meanwhile, the Minister for Finance, Mr Quinn, said that initial contacts with the EU Commission had suggested that it was" broadly very pleased" with the plan.
Mr Quinn acknowledged that there was disquiet in some other EU states about a perception that companies were relocating businesses to Ireland due to the tax regime. But he said that the main reason companies invested here was the availability of a skilled and educated labour force. "We have nothing to hide in our tax regime," he added.
