asked the Minister for Finance if he considers it satisfactory that a company (details supplied) which made a profit of £16.8 million in the first six months of the year, should have paid only £600,000 on those profits, a rate of less than 5 per cent when the standard rate of tax for the PAYE sector is 35 per cent, and many workers are paying an even higher rate; if he has any plans to increase the amounts of tax paid by commercial interests; and if he will make a statement on the matter.
Ceisteanna — Questions. Oral Answers. - Company Taxation.
5.
It would be entirely inappropriate for me to comment on the tax affairs of any particular taxpayer, whether an individual or company. However, as the Deputy will appreciate, many companies are in a position to reduce tax liability in a perfectly legitimate manner by availing of investment incentives and certain special rates of corporation tax which have been deliberately provided by the Oireachtas. No company should be subject to criticism for that. It is vital that, in any changes which might be contemplated in company taxation, we preserve an overall fiscal environment which encourages the kind of economic development required for employment creation.
I suppose it is no harm to say that the company to whom I am referring are Guinness, Ireland.
It is harmful to say it. On a point of order, it has not been the custom to mention individual taxpayers, however large, in this House.
Irrespective of what the question that the Minister is replying to was about, is he aware of the report in today's papers of the profits of Guinness, Ireland leaping to 31 per cent? Is he aware that in the case of that company not alone were the profits paid last year 5 per cent but it is unlikely that any profits will be paid in the next seven years because of the capital allowances they have accumulated of £120 million to offset against tax? In view of the very high profits being made by this company, does the Minister consider that it is right that they should pay no tax whatever as a result of the capital allowances?
I am not going to comment on the affairs of any taxpayer. However, many of those who are responsible for the creation of employment by investment of substantial sums borrow those sums of money and the interest that they pay on that money and the capital allowances that they are entitled to on investment provide them with the means of reducing the tax that they pay. However, if the investment had not been made in the first place, the jobs would not exist and the PAYE revenue from the people employed in the company would not arise with the Exchequer. It is important not to consider the matter in isolation of the employment that is created.
As to the general question of the structure of company taxation, I am reviewing that in preparation of the budget.
Will there be a budget?
We will give them a hand.
Capital allowances are quite high while the rate of corporation tax on the non-manufacturing sector is also very high, namely 50 per cent, and there could be a case for having a better balance between the two.
(Interruptions.)
Could we have a little order?
Is the Minister aware that in the UK, Mrs. Thatcher considers the capital allowances over generous and has been reducing them and that at the same time the percentage of corporate tax as a percentage of total tax revenue in Ireland is only 3.8 per cent whereas in the UK under socialist Mrs. Thatcher, the percentage of corporate tax is 10.7 per cent? In view of his reply that our corporate taxes are high, I would suggest that those in the UK are three times as high.
We have a system which the UK does not have of a 10 per cent maximum corporate tax for manufacturing companies. That is a very deliberate choice in tax policy which has bilateral support in this House and is responsible for a large part of the foreign investment that we have attracted, and that has inherent in it a lower tax yield for manufacturing corporations.
I have one more question in relation to corporation profits tax. In finding out the profits of a company, is the Minister prepared to accept what a certain company director says in today's paper, that profits arising from rationalisation and from the currency adjustments are not really profits in this case?
They are saying that there is only £1 million trading profit whereas there is a total of £11 million. Would the Minister accept that for the purposes of corporation profit tax or would it be on the total profit?
I have not had the opportunity of studying the statement to which the Deputy refers. I would not wish to comment on it until I have.
I am talking in general terms. Would the Minister accept that profits made from currency adjustments or from rationalisation processes are appropriate profits for the purpose?
I understand that there is a further question tabled dealing with this same topic.
The Deputy is asking for an interpretation of tax law and it would be more appropriate to do that on another occasion, perhaps during the Finance Bill.
It is only important to allow Deputy Farrelly's question of national importance to be dealt with.
(Interruptions.)
The points I am making might be more relevant than some of the questions the Deputy has asked and taken up the time of the House with.
(Interruptions.)