Dáil Éireann Debate, Thursday - 18 July 2013
101. Deputy Patrick Nulty asked the Minister for Finance the amount that could be garnered annually if a minimum effective tax rate of 6% on all corporate profits were introduced as suggested by Social Justice Ireland. [36054/13]
View answerAll companies resident in Ireland are chargeable to corporation tax at the 12.5% rate on the profits that are generated from their trading activities in Ireland. A higher 25% rate applies in respect of investment, rental and other non-trading profits. Chargeable capital gains are taxable at the capital gains tax rate of 33%. There are different ways of measuring the effective rate of corporation tax depending on the variables that are used. As there is no such single internationally agreed methodology to calculate the effective rate of corporation tax, there is no reliable basis upon which to calculate the current ‘effective rate’ of corporate tax in Ireland without being potentially misleading.
Therefore, neither I, nor my Department, would be in a position to introduce a minimum ‘effective rate’ in Ireland in the way the Deputy has suggested.
To illustrate the debate on the topic, I have previously referred to an estimate from a report produced by the World Bank and PriceWaterhouseCoopers which put the effective rate in Ireland at 11.9% (Paying Taxes, 2013). 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 reports, but they do indicate that the ‘effective’ rate of tax paid by companies in Ireland is already much higher than the 6% minimum ‘effective’ rate the Deputy suggests.
Some other countries have a high headline rate of corporation tax which is then supplemented by a high number of tax reliefs which reduce the overall rate of tax paid. By contrast, the approach in Ireland is transparent: we have a competitive headline rate of corporation tax which is applied to a broad base.
We therefore have only a small number of tax incentives in Ireland, and we make sure that those we do have are specifically targeted. They are focused firstly, on the creation of additional employment as is consistent with current Government policy, and secondly on areas of innovation with a view to generating high value-added economic activity in the country. The small number of reliefs we have include, for example, the R&D Tax Credit and the 3 year exemption from corporation tax for start-up companies.
