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Ireland’s National Recovery Plan Implications for Business bri e fing The Government of Ireland has published a four-year fiscal and economic plan which: • confirms that the current 12.5 per cent rate of corporation tax will remain; and • heralds important changes in other categories of tax and in State expenditure. On 24 November 2010, in the context of anticipated access by Ireland to funding from the EU and the International Monetary Fund (“IMF”), the Government of Ireland published the “National Recovery Plan 2011-2014” (the “Plan”). Despite some political uncertainty in Ireland currently, the Plan has been endorsed by the EU Commission and by the IMF and seems likely to be implemented. This briefing sets out the key points of the Plan for those doing business in Ireland. Ireland’s National Recovery Plan Economic Policy and Context While many economic indicators suggest that Ireland is emerging from recession, it is necessary to provide capital to certain banks and to address the structural budget deficit by adjusting the balance between State income and expenditure. This adjustment will accompany a range of initiatives to promote competitiveness, growth and employment and to retain the strong attraction of Ireland as a place in which to do business, and particularly for investors from outside Ireland. Business Taxes: Corporation Tax Rate Unchanged A key message in the Plan and in Government statements is the “unambiguous” confirmation that there will not be any change to the current 12.5 per cent rate of corporation tax. Media reports of the views of other EU Member States underline the legal position that the setting of this rate is a matter for the fiscal policy of Ireland only. Business Climate: Competitiveness, Growth and Employment The Plan expresses strong support for a number of international business sectors in Ireland, including the International Financial Services Centre and the ICT and life sciences sectors, as well as further support for Ireland’s green economy initiative and for the digital economy and the smart economy generally. Other initiatives include a tax-efficient scheme (which will be launched in 2011) to encourage investment in businesses that create employment, and early actions to reduce waste and energy costs for businesses. State Spending Underpinning the Plan is a reduction of €15bn in the budget deficit over the four years of the Plan through a combination of €10bn in spending cuts and €5bn in additional tax and new revenues, but with no change to the 12.5 per cent rate of corporation tax. mccann fitzgerald · november 2010 It is anticipated that the budget deficit will reduce below three per cent of GDP by 2014, positioning Ireland favourably to continue as a preferred location for foreign direct investment. Ireland’s National Recovery Plan Further information on the Plan is available from: John Cronin Peter Osborne Chairman Consultant ddi +353-1-607 1284 ddi +353-1-611 9159 email john.cronin@ mccannfitzgerald.ie email peter.osborne@ mccannfitzgerald.ie or from your usual contact in McCann FitzGerald. Principal Office Riverside One, Sir John Rogerson’s Quay, Dublin 2 Tel: +353-1-829 0000 | Fax: +353-1-829 0010 Brussels 40 Square de Meeûs, 1000 Brussels Tel: +32-2-740 0370 | Fax: +32-2-740 0371 London St Michael’s House, 1 George Yard, Lombard Street, London EC3V 9DF Tel: +44-20-7621 1000 | Fax: +44-20-7621 9000 Email [email protected] © McCann FitzGerald, November 2010 www.mccannfitzgerald.ie This document is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.