Written Answers Nos. 73-81
73. Deputy Patrick Nulty asked the Minister for Finance if he has met with the tobacco industry or lobbyists on its behalf in 2013; the persons present at these meetings; the matters that were discussed; and if he will make a statement on the matter. [26050/13]
View answerI met with representatives of the Irish Tobacco Manufacturers Advisory Committee (ITMAC) in 2013. This meeting was attended by the Taoiseach and the Minister for Justice and Equality on matters concerning the revision to the EU Tobacco Products Directive as well as tobacco smuggling and the illicit tobacco market. I was accompanied at the meeting by one of my advisors.
74. Deputy Billy Timmins asked the Minister for Finance the position regarding remission of the vehicle registration tax (details supplied); and if he will make a statement on the matter. [26061/13]
View answerI am advised by the Revenue Commissioners that Section 134(3) of the Finance Act 1992 (as amended) and Statutory Instrument No. 353 of 1994 (Disabled Drivers and Disabled Passengers (Tax Concessions) Regulations, 1994 (as amended) provide for permanent relief from the payment of specified maximum amounts of VAT and VRT for persons registered under the scheme. This scheme is administered by the Revenue Commissioners, who have sole responsibility for the determination of claims for this relief. The Revenue Commissioners have advised that in order to qualify for relief under the Scheme the specific organisation must be chiefly engaged in a voluntary capacity on a non-commercial basis, in the care and transport of severely and permanently disabled persons. A ‘disabled person’ means a person who is severely and permanently disabled, fulfilling one or more of the medical criteria set out in Regulation 3 of the Regulations referred to above. A determination in relation to the application made by the body in question will be issued within the next two weeks.
75. Deputy Pearse Doherty asked the Minister for Finance if his attention has been drawn to a 1998 report produced by his Department on Irish registered non-resident companies which stated that IRNR companies have posed a threat to Ireland's international image and its reputation as a well-regulated jurisdiction for conducting business and that the companies are regularly advertised for sale in magazines alongside companies which are incorporated in tax havens; his views on whether the findings of this paper still stand; and if he will make a statement on the matter. [26063/13]
View answer76. Deputy Pearse Doherty asked the Minister for Finance if the findings of a 1998 Department of Finance report on Irish Registered Non-Registered Companies were ever enacted on, including the recommendations for company law and taxation elements; and if he will make a statement on the matter. [26064/13]
View answer77. Deputy Pearse Doherty asked the Minister for Finance his views following a 1998 report on Irish Registered Non-Resident Companies by his Department that changes need to be made to IRNR companies that change the tax residence rules where registration entails a test of tax residence as an alternative to the control and management test. [26066/13]
View answerI propose to take Questions Nos. 75 to 77, inclusive, together.
Each year, as part of the Budget and Finance Bill process, papers are prepared by my Department for consideration by the Tax Strategy Group which is a group of senior officials from a number of Government Departments. These annual Tax Strategy Group (TSG) papers are then published on the Department of Finance website when the Budget and Finance Bill process has concluded. The paper in question is a Tax Strategy Paper from 1998 which is available on the Department’s website and can be reached at the following link: http://www.finance.gov.ie/viewdoc.asp?fn=/documents/Publications/tsg/tsg9855.htm.
This report followed work undertaken by the Department of Finance, the Revenue Commissioners and what is now the Department of Jobs, Enterprise and Innovation. The Department of Justice, Equality and Law Reform and the Attorney General’s office were also consulted. The issues outlined in the paper were subsequently addressed by a package of measures including amendments to Company Law provisions and the introduction of taxation provisions in Finance Act 1999.
The focus was on companies, engaged in fraud, money laundering, drug-trafficking and other illegal activities, which had no contact or association with the State following their registration. As these companies were managed and controlled outside the State, they were not resident in Ireland for tax purposes under our long-standing management and control rule. The measures were designed to target as far as possible those companies which have no economic connection with Ireland and to minimise any adverse effects on legitimate business. The Company Law measures are contained at sections 42-51 of the Companies Amendment)(No. 2) Act, 1999, which was enacted on 15 December, 1999.
First, as a precondition of incorporation, every application for registration is required to demonstrate that the proposed company intends to carry on an activity in the State. Secondly the 1999 Act required that every company registered in the State was required to maintain an Irish resident director or bond to the value of €25,394.76. The Irish resident director requirement was subsequently changed to a requirement for a director resident in the European Economic Area. Additionally the number of directorships which could be held by one person was limited to 25 (subject to certain exemptions). Finally the Act contained enhanced strike-off provisions and enhanced notification to the CRO where directors have resigned.
The taxation measures are contained in 23A of the Taxes Consolidation Act 1997 which was introduced by section 82 of Finance Act 1999 in order to supplement the management and control rule, which is the primary determinant of company tax residence, by providing that certain companies incorporated in the State are to be regarded as being resident in the State for tax purposes.
Consistent with the purpose of the provisions - to address companies that were not managed and controlled in the State and had no real connection with the State apart from having been incorporated here - the 1999 additions to the residence rules provided that only Irish-incorporated companies with no other connection with the State were to be regarded as resident in the State by virtue of their incorporation here.
A company incorporated in the State is not regarded as tax-resident here where -
- either the company or a related company is carrying on a trade in the State and either -
- the company is ultimately controlled in a tax treaty country or in an EU Member State or
- the company or a related company is quoted on a recognised stock exchange in the EU or in a tax treaty country, or
- the company is treated under a tax treaty as not resident in the State.
78. Deputy Pearse Doherty asked the Minister for Finance if he has considered imposing limits on the transfer of losses within group companies; if such a precedent exists for this limiting in other states; and the conditions that currently apply to the transfer of losses in group companies. [26067/13]
View answer81. Deputy Pearse Doherty asked the Minister for Finance the estimated loss to the Exchequer in corporation tax as a result of loss transfers among group companies; his views on whether this is aggressive tax planning and avoidance; the steps he has taken to alleviate the impact of this on the Exchequer; and the steps he has taken at European level to ensure this type of activity is limited. [26070/13]
View answerI propose to take Questions Nos. 78 and 81 together.
In recognition of the fact that groups of companies generally comprise a single economic entity, the Taxes Consolidation Act 1997 provides that trading losses of a group company in an accounting period may be surrendered and offset against the profits of another group company in the corresponding accounting period.
To qualify for the relief, both the surrendering company and the claimant company must be resident in the State and be members of the same group. Two companies are members of a group of companies if one company is a 75% subsidiary of the other or both are 75% subsidiaries of a third company, where the third company is resident in the State or a treaty partner country or is quoted on a recognised stock exchange. A company is a 75% subsidiary of another company where not less than 75% of its ordinary share capital is owned directly or indirectly by that other group company.
Under the existing group relief provisions, only current year trading losses may be surrendered by one group company to another group company and any losses surrendered must be used by the claimant company in the same or corresponding accounting period. The relief does not apply in respect of trading losses brought forward by the surrendering company from previous accounting periods. Also, any losses surrendered to a claimant group company cannot be carried forward by that company to future accounting periods.
Based on preliminary data derived from corporation returns for the year 2011, the total amount of trading losses for which group relief was claimed in these returns was €2,443 million and the estimated tax cost in respect of these claims was €305 million. This cost does not take account of any behavioural response by companies to ensure continued utilisation of the losses concerned were group relief to be removed.
Group relief is a common feature of corporate tax systems and similar relief in one form or another is available in many other countries, although the terms and conditions will vary from country to country. The availability of group relief is an important facility for Irish and multinational enterprises which conduct their business operations within a group of companies. Imposing a limit on such relief would put these enterprises at a disadvantage vis-à-vis enterprises that operate through branch structures rather than subsidiaries and, in the absence of other countries applying such a limit, could be detrimental to our international competitiveness.
The transfer of losses within a group, by claiming group relief as provided for in the legislation in respect of losses that have been incurred by the group, could not be said to constitute aggressive tax planning and I would not see this as an activity to be limited in the context of initiatives at European level to counter aggressive tax planning. However, I would point out that the Taxes Consolidation Act does contain restrictions to counter the transfer of losses from one company to another for tax avoidance purposes, often referred to as “loss buying”. For example, Section 400 of the TCA provides that, where a loss-making trade is transferred from one company to another company in a group situation, the transferred trade is treated as a separate trade distinct from any other trading activities carried on by the successor. Any unused losses forward of the transferred trade are only allowable against profits attributable to that separate trade. This ensures that trading losses are ring-fenced to that trade and may not be offset against other trading income of the successor.
In addition, Section 401 of TCA provides that where, within a period of 3 years, there is both a change of ownership of a company and a major change in the nature or conduct of the trade carried on by the company (e.g. major change in products, services, customers or markets), trading losses incurred by the company before the change of ownership are not allowable against trading income of the company after the change of ownership. The effect of these provisions to counter “loss buying” is to restrict the scope for utilising losses for tax planning purposes by combining loss-making and profitable business activities. These provisions are kept under review and, if any loopholes or weaknesses that pose a tax risk are identified, I will not hesitate to introduce appropriate legislative amendments.
I should add, finally, that the Revenue Commissioners monitor and assess claims for group relief as part of their ongoing risk management and audit programme. Revenue has a range of resources at its disposal, both legislative and administrative, to counter tax avoidance and it will not hesitate to challenge claims for relief in respect of losses that are contrived and not genuine commercial losses incurred by an enterprise.
79. Deputy Pearse Doherty asked the Minister for Finance if tax data on multinational companies based here is collated separately; and if so, if he will state the minimum effective rate of tax paid by multinational corporations to the Exchequer. [26068/13]
View answerI am informed by the Revenue Commissioners that as multinational companies on tax records are not specifically distinguished from other companies there is no precise basis on which the taxes paid by multinational companies can be separately ascertained. Where necessary, it is possible for Revenue’s Large Cases Division (which manages the tax affairs of most multinational companies) to manually identify the top payers among these companies on a case by case basis and extract the necessary tax details to provide indicative figures. The amount of corporation tax paid in 2012 by the top 10 companies managed in Revenue’s Large Cases Division was €1.42 billion.
80. Deputy Pearse Doherty asked the Minister for Finance the amount that could be raised for the Exchequer if corporation tax was applied to dividends received by one Irish resident company from another Irish resident company. [26069/13]
View answerSection 129 of the Taxes Consolidation Act 1997 provides that corporation tax is not charged on dividends received by an Irish resident company from another Irish resident company. The reason for this is that such dividends are paid out of profits of the paying company which have already been subject to corporation tax and to apply a corporation tax charge on the company receiving the dividends would, in effect, amount to double taxation. If an Irish resident company were to be made chargeable to corporation tax on dividends it received from other companies resident in the State, it would be necessary to provide a credit for corporation tax paid by the paying company on profits out of which the dividends are paid. As such a credit would offset the corporation tax payable on dividends received, there would be no net gain to the Exchequer from the removal of this exemption.
