Will the UK decision to leave the EU impact the Irish business and individual? The answer is yes. It will take some time for the impact of Brexit to become clear and it will dependent on the underlying activities and capital structure of businesses, the sector within they operate and the international nature of the business.
Brendan Jennings, Managing Partner at Deloitte said: "There is no doubt that Brexit brings many new uncertainties to Irish business. Depending on the sector and market there will be positives, and potential short to medium term downside risks to Irish companies. Irish businesses have proven, particularly over the last number of years, how resilient and flexible they can be in responding to changing market circumstances."
Before getting into details of what we can expect after the Brexit, we need to first understand the facts. InFacts published a great video on what the Brexit means and why the vote to leave the EU was a bad choice:
Video courtesy of InFacts.
Opinions about why the UK decided to leave the EU are many, but the opinion of social scientist Alexander Betts, about the Brexit and his four post-Brexit steps toward a more inclusive world, caught our attention.
Video courtesy of TED.
Coming back to our previous statement: The Brexit will impact the Irish market. Why? Even if the Irish economy is not dependent on the UK, the UK remains one of Ireland's closest economic partners.
Let's focus on the potential tax implications for investors and taxpayers in Ireland to see how the Brexit affects them.
1.Potential Tax Effects:
It is difficult to determine the implications of leaving the EU since the Brexit negotiations will take at least two years from the date Article 50 of the Lisbon Treaty is invoked. From a tax perspective, the vote to leave the European Union will have little, if any, immediate impact on either indirect or direct taxes.
At the moment, Customs Duty is almost entirely governed by EU Directives and Regulations. Following Brexit, the control of Customs Duty would revert to the UK. Therefore, all trade between the UK and the EU will be recognized as imports and exports.
Excise Duty is not a fully harmonized tax. Therefore, the Brexit will not bring any changes to excise rates in the UK market.
With respect to VAT matters, the practicalities of cross-border transactions will change following Brexit. Because of this, EU transactions with the UK will become "imports" and "exports".
Direct taxes are not expressly dealt with by the EU treaties. They an area of national competency, which only must be exercised in accordance with the EU treaties. Therefore, direct taxes are less likely to be directly affected by Brexit.
Talent has become one of the key assets of most businesses. As a result of the UK's decision to exit the EU, businesses will need to give consideration to immigration, tax and social security and mobility policy implications.
5.Foreign Direct Investment("FDI"):
EU membership has played a key role in attracting FDI to the UK. The UK outside the EU is likely to be considered less attractive by some companies as a FDI location because of uncertainty and reduced access to the EU Single Market. Even so, the Brexit offers potential opportunities for Ireland to attract FDI projects, including some relocation of FDI from the UK.
To sum it up, the vote in favour of the UK leaving the European Union will have little, if any, immediate impact on either indirect or direct taxes in Ireland. The scope of any future tax changes will be determined by how the UK negotiates its exit.In terms of FDI, Ireland's political stability and access to the EU Single market will ensure that Ireland remains a key location for FDI.