Ireland Offers Lowest Tax Burden In EU

Ireland has the lowest tax burden in the European Union, a new report from the European Union's statistics agency confirms.
Eurostat has released its annual Taxation in 2018 report, which shows that Ireland continued to offer the most attractive tax regime for economic activities in the European Union, and by a large margin.

Ireland had a tax burden of just 23% of gross domestic product (GDP). In second place was Romania (27.1%), followed by Bulgaria (29.9%), Lithuania (30.5%) and Latvia (31.4%).

The tax burden in Ireland is less than half that in France (48.4%), which was top at the other end of the scale. The next highest burdens as a percentage of GDP in 2018 were recorded in Belgium (47.2%), Denmark (45.9%), Sweden (44.4%), Austria (42.8%), Finland (42.4%) and Italy (42.0%).

The Eurostat report looks at all taxes on economic activity, rather than the tax burden specifically on companies, which is considerably lower in Ireland.

In the report, the tax-to-GDP ratio is the sum of taxes on production and imports, including value-added tax, which is levied on consumers; taxes on income and wealth; social security contributions and taxes on individuals; and corporate taxes.

Ireland was among just a few jurisdictions that lowered its tax burden in 2018 compared with 2017.

Tax rose relative to GDP in sixteen EU member states. The largest increases were seen in Luxembourg (39.1% in 2017 to 40.7% in 2018), Romania (from 25.8% to 27.1%) and Poland (from 35% to 36.1%).

The tax burden was cut by less than 1% of GDP in the other seven territories: in Ireland, Denmark, Hungary, Finland, Sweden, Latvia, Malta and Italy.

Ireland's tax burden has been declining consistently over the past decade. In 2007, the tax-to-GDP ratio was 32.1% of GDP. Since then, it fell to 29.2% of GDP in 2012, to 23.8% of GDP in 2015, and to 23% of GDP in the most recent report.

The Irish Government is committed to providing businesses with tax certainty, and has said it will retain the policies that are most important to attracting business and investment, including most notably its 12.5% corporate income tax rate.

In recent years it has sought to further appeal its appeal by offering a wide range of tax breaks to those setting up in Ireland.

In its 2020 Budget, the Irish Government decided to take a prudent approach and announce improvements to tax incentives for small and medium enterprises, rather than deep tax cuts. This is despite a record tax-take from corporations, the revenues from which are being set aside.

Irish Finance Minister Paschal Donohoe explained that the decision to build Ireland's reserves is to enable it to respond nimbly to Brexit in the future.

With Ireland's finances in a strong position and opposition UK political parties having signalled their support for a second Brexit referendum, Ireland looks likely to further distance itself from the pack in the years to come by using its surpluses to further enhance its appeal.

WHY SMART MBS?

SMART MBS has the expertise to provide you with a range of services to support setting up your business or expanding into Ireland. We can tailor a cost efficient package based on any outsourced services that your business requires. You can book a free consultation here.