Irish companies paid ‘effective’ 12.4% tax rate on profits last year

Companies in Ireland paid an ‘effective’ 12.4% tax rate on profits last year, a tenth of a per cent less than the statutory corporate tax rate of 12.5%, according to accounting firm PwC and the World Bank.

The 2020 PwC-World Bank Paying Taxes report shows that the amount of tax paid by Irish-based companies was ‘broadly in line’ with the headline tax rate on profits.

In 2019, Irish companies paid 12.4% of their profits towards labour taxes such as PSRI and social insurance, with a further 1.3% going on other taxes like VRT.

Companies here last year paid just over a quarter (26.1%) of their profits to the Exchequer, which compares to an EU average of 38.9% — the bulk of the difference being put towards higher labour taxes (25.3%) in other EU member states — and a global average of 40.5%.

Irish firms spend just over two weeks or 82 hours dealing with their tax affairs, compared to an EU average of 161 hours, making it the best country in Europe for ease of paying taxes.

Companies based in Ireland make tax payments every six weeks, with it taking around two hours to comply with a corporate tax correction in Ireland as opposed to seven hours in the EU.

‘The report reconfirms Ireland as the most effective country in the EU for paying taxes. The analysis considers the ease of filing and paying taxes, as well as the time needed to obtain refunds and make corrections,’ PwC Ireland head of tax Susan Kilty said.

‘The more efficient a tax system, the better it is for business. This, in turn, helps promote economic growth and investment. We also do very well in terms of tax competitiveness. This is crucial to our standing as a location of choice for foreign direct investment.’

PwC Ireland credited the Revenue for making significant investments in technology in recent years to make business tax payments more efficient, including the rollout of real-time reporting for PAYE.