Dáil Éireann Debate, Thursday - 17 January 2013
43. Deputy Richard Boyd Barrett asked the Minister for Finance if he will explain the claim that the effective corporation tax rate is 11.9% when the total corporation tax paid suggests a far lower effective tax rate; and if he will make a statement on the matter. [1931/13]
View answer54. Deputy Mary Lou McDonald asked the Minister for Finance his views on the lack of data on the effective rate of business tax; if he will commit to increasing the rate of effective tax paid by companies in view of reports showing that several large companies pay as little as 2.5% in effective corporation tax; and if he will make a statement on the matter. [1789/13]
View answerI propose to take Questions Nos. 43 and 54 together.
In a number of answers to previous Parliamentary Questions on this issue I have repeatedly stated that there is no agreed international methodology for calculating the effective rate of corporation tax.
To illustrate the debate on the topic, I have referred to an estimate from a report produced by the World Bank and PriceWaterhouseCoopers (Paying Taxes, 2013) which put the effective rate in Ireland at 11.9%. This comparative report looked at 183 countries and calculated the effective rate based on the tax obligations of a standardised company operating in each country, using standard assumptions regarding exemptions, deductions and allowances. I also referred to a study by the European Commission (Taxation Trends in the EU 2011), which indicates Ireland has an effective corporate tax rate which is close to or indeed higher than the statutory 12.5% rate (this is likely because of the 25% rate that applies generally to non-trading income).
I have been clear that my Department does not take ownership of these figures, but rather I have quoted them to give an example of the differences that exist in comparative studies on effective tax rates, depending on how the rate is calculated or who carries out the calculation.
The issue relates to the absence of an international standard methodology of how to calculate the ‘effective rate’, not to the “lack of data” in relation to corporation tax paid. Detailed data is contained in the Statistical Reports which are published annually by the Revenue Commissioners on their website – www.revenue.ie. In addition I would refer the Deputies to the tables contained in the response to Parliamentary Question 1739, which will shortly be published in the 2011 report on the website of the Revenue Commissioners and which set out the corporation tax figures for 2010 in full.
I am aware of recent media reports which 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 that 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%.
It is important to state clearly that such companies are not paying a low rate of Irish tax – all companies in Ireland pay the standard 12.5% rate 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, 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 produce an average tax rate for the companies concerned that is very significantly lower than 12.5% — and an incorrect inference that the full Irish profits are not being charged.
