This year's Finance Bill contains several initiatives to improve Ireland's competitive position as a good place to invest. But there is also a heavy emphasis on collection, restriction of existing tax reliefs, and enforcement.

Ireland as a location for Multinational Headquarters

Changes to the Corporation Tax regime will make it easier for multinationals to locate their headquarters, their research departments and their patents and copyrights here. The financial services industry located primarily within the IFSC will benefit from changes to modernise the tax rules governing the investment of funds.

Restrictions on Tax Reliefs for High Earners

The measures in the Finance Bill to increase the effective rate of income tax for those benefiting from reliefs to 30%, and to change the entry point to the restriction to €125,000 with the full restriction applying at €400,000 in effect represents the elimination of the use of tax reliefs and incentives. It had been Government policy to promote tax-based investments, but the promised tax benefits are now heavily restricted.

Our research shows that taxpayers in the higher income brackets pay on average an effective rate of 30% anyway before these changes. As many of the reliefs that are restricted are based on property investment, one of the main effects of this change will be to reduce an individual's capacity to pay back borrowings. This is an unwanted consequence, especially in the light of the problems in the banking sector.

Transfer Pricing

Transfer Pricing rules are a feature of the tax system in all modern, developed economies. It is essential that Ireland stays up-to-date to remain competitive in the investment marketplace. At first view the proposed Irish Transfer Pricing rules have the features of best international practice – the arm's length principle, reliance on documentation – while not introducing significant additional compliance requirements for most businesses. We welcome that Small and Medium Enterprises are to be excluded, and that there is a lead in time for the rules to be implemented.

New Domiciles Levy

This will be a €200,000 a year charge for individuals with Irish assets worth €5 million and annual income of €1 million, but the question remains as to how Revenue can enforce it. Our tax residence rules may require modernisation – they predate electronic commerce and our modern communications net-work, and the Commission on Taxation suggested ways in which this could be done. Re-introducing the concept of domicile (which depends, for example, on where you want to be buried) as the basis for a significant tax charge is not the way forward.

Islamic Financing Arrangements

Islamic financing arrangements that are compliant with the principles of Shari'a law do not feature the making or receiving of interest payments. This means that there are different structures put in place to provide investment, financing and insurance services. Where possible, the Irish Revenue have applied tax to Islamic Financing Arrangements as if they operated along the lines of equivalent Western models. The new rules in today's Finance Bill will formalise these tax treatments. They should enhance Ireland's ability to attract Islamic Financial Services providers to the IFSC, while at the same time facilitating the provision of services to our Muslim population.

A key element of any inward investment strategy is the network of Double Taxation Agreements, and Ireland needs to arrange more Agreements with Muslim states. Ireland recently concluded an agreement with Bahrain, and agreements are at an advanced stage with countries such as Kuwait, Saudi Arabia, United Arab Emirates and Egypt.

Abolition of Reliefs

A number of reliefs, ranging from relief for investment in childcare facilities and significant buildings to relief for bin charges are to be abolished.

Capital Taxes

Significant changes have been made to the tax payment and filing dates which bring the payment and filing system for Capital Acquisitions Tax somewhat more in line with other self assessment taxes.

VAT on Local Authorities

Following a European Court of Justice decision last year, local authorities in the same market as private operators must now charge VAT on services such as off street parking and waste collection.

Revenue Powers

Revenue are granted significant additional powers of investigation, collection and enforcement across all tax heads. It must be remembered that Ireland already has very high levels of tax compliance by international standards. Tax evasion is not in anyone's interest.

But businesses exist for purposes other than to act as taxpayers and tax collectors, and the new powers being granted to Revenue must be used sensibly and sparingly. Otherwise, the cost of tax compliance for compliant businesses will be too high.