Dáil Éireann Debate, Wednesday - 10 March 2021
272. Deputy Ged Nash asked the Minister for Finance the amount forgone to the Exchequer through past losses written-off against future tax liabilities by all companies from 2016 to 2020; the amount written off by company size and by the number of employees, respectively, in tabular form; and if he will make a statement on the matter. [12620/21]
View answerAs the Deputy is aware, loss relief for corporation tax is a long-standing feature of the Irish corporate tax system and a standard feature of corporation tax systems in most OECD countries. It recognises the fact that a business cycle runs over several years and that it would be unfair to tax income earned in one year and not allow relief for losses incurred in another. Loss relief works by allowing a deduction for losses incurred in one accounting period against profits earned in another period.
Each year, Revenue publishes detailed analyses of the previous year’s corporation tax returns and payments which includes breakdowns of corporation tax loss relief by sector (available at https://www.revenue.ie/en/corporate/information-about-revenue/research/research-reports/corporation-tax-and-international.aspx). These reports explain that, while a company must record losses claimed on their corporation tax returns, losses can only be used if there is an appropriate corporation tax liability to offset. Also, after the first year of claim, any losses and capital allowances carried forward are combined in tax returns data. Therefore, it is not possible to separately identify capital allowances and losses in the carry forward at aggregate level and the figures below for loss relief include excess capital allowances carried forward.
The amount of loss relief used in all 2016, 2017 and 2018 tax returns is as shown below. These figures include current year losses used in each year (i.e. losses incurred in the current year and offset against other sources of income) in addition to prior-year losses carried forward into that year. Revenue is currently analysing the 2019 corporation tax returns and will publish the results of this analysis later this year (the last of these returns were not due to be filed until September 2020). 2020 corporation tax returns are due to be filed up to September 2021 and Revenue will publish their analysis of these returns in 2022.
|
Revenue analysis of corporation tax loss relief |
2016 |
2017 |
2018 |
|
Loss relief used |
€14.9 bn |
€14.4 bn |
€13.4 bn |
An analysis of loss relief used on the corporation tax returns for 2018 by company size by number of employees is shown in the following table. It should be noted that this data refers to the individual companies claiming the loss relief. Where such companies form part of a larger corporate group, the overall level of related employment may be significantly larger. Similar analysis is not readily available for earlier years, but I am advised that the distribution is not expected to vary greatly from year to year.
|
Number of employees |
Number of companies availing of loss relief |
Estimated loss relief used€ bn |
|
Less than 10 |
20,733 |
7.4 |
|
11 to 49 |
4,203 |
1.8 |
|
50 to 249 |
1,034 |
1.4 |
|
250 or more |
235 |
2.8 |
|
Total |
26,205 |
13.4 |
It should also be noted that the above tables show the amount of loss relief used by companies, but the value of this loss relief depends on whether the losses were incurred in the course of a trade that is taxable at 12.5% or 25%. (The profits of an ‘excepted trade’ are chargeable to corporation tax at the 25% rate. An ‘excepted trade includes’: (i) subject to exclusions, a trade of dealing in or developing land; (ii) a trade involving working scheduled minerals, mineral compounds or mineral substances; and (iii) a trade relating to certain petroleum activities).
I am advised by Revenue that the value of loss relief used for all years up to 2018, the latest year available, is published at https://www.revenue.ie/en/corporate/information-about-revenue/statistics/tax-expenditures/costs-expenditures.aspx. This includes the cost associated with current year losses used and the cost of claims by self-employed taxpayers registered for income tax (Revenue advises me that over 90% of the cost shown for 2018 is associated with companies).
