Ireland tops list of ‘competitive tax destinations, but UK remains strong contender’, says survey

KPMG said that in this year’s figures, the UK “has built on its 2013 absolute score in terms of the frequency with which respondents cite it as being in their top three most competitive tax regimes, but it has slipped to second place overall”.

Luxembourg, the Netherlands and Switzerland “have all lost ground” in the latest rankings, according to the survey.

KPMG’s head of tax policy in the UK Chris Morgan said: “This year, respondents’ perception of how attractive Ireland’s tax regime is compared to other countries jumped significantly, with Ireland most frequently cited among the top three most attractive tax regimes overall. Perceptions of the UK’s attractiveness improved slightly versus 2013 but not enough to retain the top spot in the 2014 rankings.”Morgan said: “In contrast, the tax regimes in Luxembourg, Switzerland and the Netherlands are viewed as less attractive in 2014, perhaps due to significant proposed changes in tax regimes (especially in Switzerland), increased regulatory scrutiny on tax issues and concerns about tax rulings and EU state aid issues in the EU countries.”

However, Morgan said: “It’s encouraging that the UK has held its overall score on tax competitiveness this year which suggests respondents remain broadly content with the direction of travel on UK tax policy. Ireland may have leapfrogged into the top spot, but the results suggest that has been a result of it taking ‘votes’ from other European competitors rather than the UK.”

Morgan said respondents seemed “broadly happy with the direction of travel in terms of tax reform” and supported efforts by the Organisation for Economic Co-operation and Development (OECD) to reform the international tax system. “The sentiment among the senior tax executives we spoke to appears to be one of ‘steady as she goes’ rather than any urgent calls for radical reforms.”

Morgan said that while Ireland had also “come in for criticism from some quarters on its tax policies, it appears that companies accept its very clear cross party commitment to retaining the low rate and believe that Ireland will introduce further measures like an intellectual property box regime to maintain its competitiveness”.

“According to our survey, stabilising and simplifying the tax system are the two most important measures to prioritise to drive growth over the next year,” Morgan said. “However, given that simplification would inevitably involve change to the system, there is a natural tension between these factors. The general sentiment seems to be that it makes sense to allow recent changes made to the tax system to ‘bed in’ before introducing any additional measures.”

KPMG said the survey “expressly asked about responsibility in business” for the first time this year. “Respondents agreed that responsible business should act in the interest of the common good and that tax was integral to this,” KPMG said. “Additionally, a significant proportion of respondents (38%) said they had become more transparent on how they report tax in the last 12 months”.  Some 44% of respondents felt “they would be more transparent in the future, with this particularly pronounced among the FTSE 100 where just over half said so”, KPMG said.

In October the Office of Tax Simplification (OTS) issued its final report on the competitiveness of the UK Tax administration. This recommended making simplifications to the UK tax system to improve its ranking in the World Bank’s ‘Paying Taxes’ report. The recommendations included abolishing capital allowances and instead giving tax relief for depreciation.

Catherine Robins, a tax expert at Pinsent Masons, the law firm behind Out-Law.com said: "We expect to hear in this week's Autumn Statement how the government proposes to respond to the OTS's report and whether they are considering any fundamental changes to the UK tax system to improve its competitiveness".

The OECD said earlier this year that a new global standard for the automatic exchange of financial information aimed to “put an end to banking secrecy” in tax matters and increase transparency. The ‘Standard for Automatic Exchange of Financial Account Information in Tax Matters’, launched by the OECD, called on governments to obtain detailed account information from financial institutions and share the information automatically with other jurisdictions each year.