Virgin attracted to Ireland by low-tax promise

The decision by low-cost airline Virgin Express to relocate parts of its operations in Ireland will cause something of a stir in the airline industry. But it also has wider implications. Virgin has stated explicitly that the high levels of corporate tax and government regulation in Belgium are the reasons it is planning to move to Ireland. There has been speculation in the industry that it is trying to get some concessions from the Belgian government, but the airline itself says that it has now decided on the Irish move.

Being tax resident in Ireland is now an attractive proposition for all types of companies. Previously our low corporation tax rate of 10 per cent attracted manufacturing and international service companies. But now the Government has agreed a timetable, under which all corporate profits tax will be harmonised at 12.5 per cent early in the next century. This has obvious advantages for attracting all kinds of business to Ireland, as Irish corporate "tax residency" becomes an attractive option. However, it could also increase tensions between Ireland and our EU partners in the fight for mobile international projects and in discussions on our tax regime at EU level.