Dáil Éireann Debate, Thursday - 17 January 2013
9. Deputy Thomas Pringle asked the Minister for Finance his views on a report that companies (details supplied) may be paying an effective corporate tax rate in this country of less than 1% and that other high profile and and highly profitable corporations may be paying similarly low effective rates of corporate tax; and if he will make a statement on the matter. [1984/13]
View answerI am precluded from discussing the tax affairs of a particular individual or company. However, I am aware of recent media reports which refer to the ways 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 some companies in multinational groups pay Irish corporation tax at rates significantly lower than 12.5%. I emphasise that such companies are not paying a low rate of Irish tax. All companies in Ireland pay the standard 12.5% rate on profits 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 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 in this way, these reports can produce an average tax rate for the companies concerned that is lower than the 12.5% rate and an incorrect inference that the full Irish profits are not being charged.
Multinational groups, with subsidiaries in other countries as well as in Ireland, incur other bona fide expenditures. For example, 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 foreign-resident subsidiaries when they are taken together. From an Irish perspective, we ensure the profits arising in Ireland are taxed at the 12.5% rate of corporation tax. We do not seek to charge profits properly attributable to other jurisdictions.
The ability of entities to lower their worldwide effective rate of tax using international structures reflects the global context in which Ireland and all countries operate. Differences arise in the legal and tax systems between countries. International tax planning takes account of these differences in national systems and rules. The only way to combat such arrangements is for countries to work together to examine these structures and consider how international rules can be amended to ensure fair levels of taxation.
Additional information not given on the floor of the House
In this regard, Ireland participates fully in the OECD's forum on harmful tax practices and the EU code of conduct group. During the forthcoming Irish Presidency of the European Council my Department intends to work closely with the European Commission and other EU member states to make progress on new EU proposals on tax evasion and aggressive tax planning.
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. The fact 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 that Ireland had an effective system for the exchange of information in tax matters and was fully compliant with OECD standards.
The job of the 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 more than 50 years. What companies do outside 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, as I have outlined, we continue to work with international bodies to ensure fair play.
That response is completely inadequate. We had a report that over a six year period Google had €47 billion in sales but had paid only €69.9 million in corporation tax, an effective rate of less than 1%. In replies to questions I had tabled to the Minister for Finance it was revealed that in 2010 total gross profits in this country made by corporations amounted to €70 billion, on which they paid only €4 billion in tax, an effective rate of a little above 6%. When ordinary workers and those least well-off are having their incomes looted through the universal social charge, property taxes and other cuts, how can the Minister stand over a situation where remarkably profitable corporations are getting away with paying almost nothing in tax? Is he going to do anything about this?
Does the Minister stand over the so-called "double Irish with a Dutch sandwich" system which reduces the effective rate of tax of corporations based in Ireland? Does he think it is appropriate or does he want to change it and shut it down? Does the Minister believe there should be a minimum effective tax rate for corporations just as there is for high-income earners?
The Minister will have noticed it highlighted in London recently that in 2011 Google had £2.5 billion in UK sales but, despite a group-wide profit margin of 33%, its main UK unit was subject to a tax charge of only £3.4 million. The company avoids UK tax by channelling non-US sales via Ireland.
Put a question, please.
This arrangement allows Google to pay taxes at a rate of 3.2% on non-US profits. It also diverts some profits through Bermuda. Is the Minister not concerned that we are being used by these people to help them avoid paying tax in other jurisdictions and does he think this is something our Government should address?
I do not mean this disrespectfully, but Deputy Boyd Barrett should re-read the reply of mine to which he referred earlier. He is confusing income and profit. While the income figure was €70 million, there is an entitlement to deduct costs from it which is how the profit figure is arrived at. The computation should be on the profit which will give a different rate. According to international studies, including one involving the World Bank, the effective rate of corporate tax in Ireland is approximately 11.9%. The EU Commission has reported that our effective rate is in excess of 12.5% because certain corporations in Ireland have a tax rate of 25% where they are not trading internationally.
The problem with the so-called "double Irish" from Ireland's point of view is that it has that name. People think that something we do here gives rise to it. That is not the case. It arises from tax codes elsewhere and the way in which the USA regards certain arrangements. We do not operate any kind of tax haven. Our position is legitimate and the 12.5% rate is applied here. Deputy Mick Wallace referred to Google's tax payments in the UK. While I cannot answer for the tax liability of Google in the UK, the 12.5% rate applies to that company here. I am concerned about the misunderstanding on this issue because it gives Ireland a bad name. If the Deputies would like a detailed briefing from tax officials in my Department, they should let me know. I will put something together to provide a briefing across parties so that Deputies can ask detailed questions in a more satisfactory way than this confrontation across the House.
We will take the Minister up on that.
Ceann Comhairle, I have another question.
No, we are over time. The question is not even in Deputy Boyd Barrett's name.
That is twice I did not get a supplementary question.
You did get a supplementary question. A supplementary is when you ask a question in response to the Minister's initial reply. It is 5.55 p.m.
Everybody else gets a second question.
No, they do not. I was trying to be generous. Do not abuse the generosity.
