The Deputy refers to companies based in Shannon. There is no preferential tax rate for companies operating out of the Shannon region. All companies based in Ireland are subject to the same rate of tax on their trading income, which is 12.5%. The 10% corporation tax regime for companies based in Shannon Airport ceased in 2005. I am aware of recent media reports that refer to the ways that some companies structure their international tax affairs to minimise their tax costs, and the fact that some of these reports make reference to Irish companies being part of these structures. I understand some of these reports have suggested that some companies in multinational groups pay Irish corporation tax at rates that are significantly lower than 12.5%. Such companies are not paying a low rate of Irish tax; all companies in Ireland pay at the standard rate of 12.5% on their profits which are generated in Ireland. The reports concerned appear to have incorrectly attributed to Ireland profits that represent the return due to assets in other jurisdictions, which assets are owned by group companies that are not resident in Ireland.
It is incorrect to relate the 12.5% corporation tax rate to both the profits of the Irish-resident group companies and the profits of foreign-resident group companies, which are not profits chargeable to Irish corporation tax. By mixing up the Irish profits and the foreign profits of multinational groups like this, these reports can suggest an average tax rate for the companies concerned that is lower than 12.5%, and make an incorrect inference that the full Irish profits are not being charged.
Multinational groups with subsidiaries in other countries in addition to Ireland incur other bona fide expenditure. Licence payments, which are paid to group companies in foreign jurisdictions for the use of intellectual property rights, are properly deductible in computing Irish profits. If these licence payments are untaxed in the foreign jurisdiction, it will reduce the average rate of tax for the total profits of the Irish and the foreign-resident subsidiaries when these are taken together. Nevertheless, the full Irish measure of profits is being taxed and the rate of tax actually paid on the profits of the Irish-resident subsidiaries is 12.5%.
The ability of entities to lower their effective rate of tax using international structures reflects the global context in which Ireland and indeed all countries operate. The tax system in Ireland has a positive international reputation based on transparency and the fact that it is applied equally and openly to all corporate taxpayers. That Ireland has an extensive tax treaty network confirms our international standing. The January 2011 Global Forum peer review report on Ireland's legal and regulatory framework for transparency and exchange of information found Ireland has an effective system for the exchange of information in tax matters and is fully compliant with OECD standards.
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Our job in government is to bring investment and jobs to Ireland and we have used the tax code and, in particular, our competitive corporation tax system to do so for over 50 years. What companies do outside of Ireland is beyond the scope of the Irish tax system. We cannot conclusively determine the effective rate of tax paid under international tax structures by reference to taxation in Ireland alone but we continue to work with international bodies to ensure fair play. Ireland is bound by the same rules on state aid, the code of conduct on business taxation, and rulings of the European Court of Justice as all EU member states. Ireland does not support harmful tax competition. Ireland continues to participate fully in the EU code of conduct group, which addresses harmful tax competition, and in the OECD forum on harmful tax practices.