Tax relief lures software firms across water

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The Independent Online

Tax is Ireland's secret weapon in drawing IT companies to its shores, the biggest boon being its rate of corporation tax. In the UK, the normal rate is 30 per cent but in Ireland it is 24 per cent.

Tax is Ireland's secret weapon in drawing IT companies to its shores, the biggest boon being its rate of corporation tax. In the UK, the normal rate is 30 per cent but in Ireland it is 24 per cent.

The rate is even more generous for IT companies. Businesses involved in certain types of manufacturing and software development are eligible for a special 10 per cent rate. However, this will only run until the end of 2002 as the European Union has put pressure on the Government to unify the tax.

But the Irish have come up with something even more beneficial, by harmonising all rates to 12.5 per cent. The change is expected to lead to a flood of IT sales and support teams, which are currently taxed at the top whack, establishing themselves in Ireland.

Says one senior source at an IT company: "Come 2003, we won't give the UK a second glance when it comes to expansion. Ireland will become a no-brainer."

Next is national insurance on share options. While the UK Government has introduced - and is close to back-tracking on - a 12.2 per cent rate, share options vested in Ireland are free of national insurance payments (called PRSI).

The social security bill for companies in Ireland is also much lower, as PRSI is only payable on income up to IR£35,000. In the UK there is no upper limit.

Therefore the bill for an employee earning IR£50,000, which is commonplace for middle-ranking IT jobs, is the equivalent of IR£1,830 more expensive in the UK.

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