I understand that the Deputy is seeking the changes to estimated tax revenue if corporation tax was amended to result in a 12.5% minimum effective tax rate being imposed on total Gross Trading Profits, without accounting for the standard deductions, allowances and reliefs which are a part of the Irish Corporation Tax system.
The trading profits of companies in Ireland are generally taxed at the standard Corporation Tax rate of 12.5 per cent, which applies to a company’s Total Taxable Income.
I would note that the difference between Gross Trading Profits and the Total Taxable Income, can be chiefly explained by the effect of capital allowances and trading losses. The provision of capital allowances for capital expenditure is a standard feature of our corporate tax system, and that unused capital allowances may be carried forward into future years. Such capital expenditure includes money a company spends on buying or maintaining land, buildings or equipment. It is also standard practice in OECD countries to allow trading losses to be carried forward into future years, in recognition that business cycles operate over more than one year.
Some of the main features of the current Corporation Tax regime are its simplicity and that it applies to a broad base. Changing this rate (or imposing additional levies of corporate profits) would involve increased complexity and could change the attractiveness of Ireland's corporate tax offering.
It is difficult to estimate any potential change in corporation tax yield from a proposed change to the corporation tax code of this nature. For example, some companies who have non-trading income taxed at 25% or capital gains taxed at 33% may not see any increase in corporation tax payable. I am also informed by Revenue that it is not possible to accurately predict the effect that changes to the operation of corporation tax in the manner proposed would have on the behaviour and decisions of large, multinational companies. This uncertainty prevents a reliable estimate being made of any yield that may accrue to the Exchequer.