Gerry Adams
Ceist:3. Deputy Gerry Adams asked the Taoiseach if the Economic Management Council has met since the budget. [47671/13]
Amharc ar fhreagraTuesday, 11 February 2014
Ceisteanna (3, 4, 5, 6)
Micheál Martin
Ceist:4. Deputy Micheál Martin asked the Taoiseach if the Economic Management Council has met since October. [2183/14]
Amharc ar fhreagraMicheál Martin
Ceist:5. Deputy Micheál Martin asked the Taoiseach when is the next meeting of the Economic Management Council. [2218/14]
Amharc ar fhreagra
Richard Boyd Barrett
Ceist:6. Deputy Richard Boyd Barrett asked the Taoiseach the date of the most recent meeting of the Economic Management Council. [4932/14]
Amharc ar fhreagraFreagraí ó Béal (31 píosaí cainte)
I propose to take Questions Nos. 3 to 6, inclusive, together.
The Economic Management Council, EMC, has met ten times since the budget in October, most recently on 5 February. In general, the EMC meets on a weekly basis. The next meeting is due to take place on 12 February 2014
I would like to raise the issue of foreign direct investment and, particularly, the PricewaterhouseCoopers-World Bank report on paying taxes in 2014 and the paper by Professor James Stewart of Trinity College, which has revealed that as a result of deliberate tax avoidance by US multinationals, facilitated by the tax code of this State, American corporations are in reality only paying an effective corporation tax rate of 2.2%. That represents a significant financial loss. This question is not about the headline corporation tax rate of 12.5% but it is about the abuse of the international tax system and tax avoidance.
Sinn Féin fully acknowledges the benefits of FDI and we know that more than 100,000 citizens are employed by American owned corporations but the notion of them paying, as Professor Stewart has pointed out, only 2.2% is not sustainable and fair. Multinationals should pay the same tax rate as indigenous enterprises. There will always be a probability that these companies will come here to avail of tax avoidance and I am sure the Taoiseach will agree that is not acceptable. It has also become a greater issue internationally because, clearly, a sustainable and fair recovery cannot be built on such a system.
I am also mindful of how this affects the developing world. At last year's Clinton Global Initiative meeting, former US President Bill Clinton raised the question of action companies could take to support development in African, which is to pay their taxes. One business person from the Continent pleaded with the big companies to pay their taxes in Africa. What plans has the Taoiseach to close tax avoidance loopholes and to restore our international reputation in this matter? Has the EMC plans to deal with this? Will that include steps to monitor the number and value of Irish registered non-residential companies operating out of the State? Can the Taoiseach ensure the State is not being used to funnel profits tax free out of the developing world? That would be entirely contrary to our sense as a people of ourselves and of the one-world vision most progressive Irish people hold.
I thank the Deputy as this is an important question for the country and for the future. When I attended the G8 summit in Lough Erne, County Fermanagh on behalf of the EU Presidency on the invitation of Prime Minister Cameron, I was struck by the debate that took place during the formal session of the summit about Africa and by comments from African leaders who were present. They made the point that countries and companies signed deals on mineral rights and so on in areas of Africa which have phenomenal natural resources and all the necessary advice was given at the outset about how they could and should operate but at the conclusion of a deal, the same level of legal or tax advice was not available. This has meant that huge swathes of tribal Africa and peoples of Africa are deprived of real benefit from many of the deals that are struck. It was on the basis of a recommendation by President Obama that the G8 agreed that in respect of many of the deals with African countries, we should be able to see to it that such expertise and analysis of deals and tax legislation, in particular, should apply in order that the benefit of deal for the extraction of minerals, for instance, would extend to the communities in which they are extracted. I recall clearly one of the African leaders pointing out that on a journey of 20 miles a lorry carrying minerals might be stopped 60 or 100 times to pay additional tolls.
I attended an OECD meeting with the Minister for Education and Skills and a number of others last week in respect of the BEPS situation which is being handled by Madame Navarro on behalf of the organisation. That arose because of the decision of the European Council last June when every country agreed that because this is an international question, it should be answered in an international forum and dealt with internationally. It is not a requirement on an individual country to respond to what is happening here.
Let us consider the position of a mobile entity which might have components manufactured or produced in the Far East, assembled in Ireland and then sold in Europe as a finished product. In that instance the intellectual property might be vested in another country. It is the connections between the different jurisdictions and the difference between the rates of tax that often apply here which sometimes give scope for comment. As is recognised by the OECD, the EU and the G20, international tax planning is an international matter. That is why Ireland fully participates in the BEPS process. There are 15 sectoral committees relating to that process and Ireland participates on all of them.
When one reads the reports on effective tax rates, one discovers that there is no single agreed methodology to calculate the tax rates of this nature that operate in any country. A number of different methodologies are put forward. The particular study to which the Deputy referred is based on US Bureau of Economic Analysis, BEA, data, which incorrectly count the profits of Irish-registered non-resident companies as being Irish. What this means is that the study included the profits of American companies that are not tax resident in Ireland. This country cannot tax profits that are properly attributable to other jurisdictions. Sometimes these things become mixed up and that results in a distorted version. As already pointed out and just as our income tax system does not levy income tax on Irish nationals who live abroad, out corporate tax system does not levy corporation tax on some Irish corporations which carry out their activities abroad.
A range of independent studies show the effective rate in Ireland as being very close to the main headline rate of 12.5%. The European Commission's 2013 edition of "Taxation Trends in the European Union" indicates an effective corporation tax rate for Ireland of 14.4%. The PricewaterhouseCoopers report shows an effective rate of 12.3% for Ireland. In response to the growing interest in this subject, the Revenue Commissioners now publish an additional explanatory note with their annual statistical report in order that everyone can see what is involved. For example, the 2012 report - which refers to the data for 2011 - indicates that aggregate net taxable profits, after taking account of various deductions, allowances, charges and reliefs, amounted to €40 billion, while the total amount of corporation tax payable on those profits was €4.2 billion. This means the total corporation tax payable - as a percentage of taxable profits - for 2011 was approximately 10.5%. While this is lower than the 12.5% rate, it can be attributed to the availability of some reliefs such as, for example, the double taxation relief and the research and development credit. While we do not generally refer to the Revenue's statistics as an effective rate, per se, they represent further evidence that companies actually pay very close to the 12.5% headline rate.
I note reports linking - in public perception - Ireland and tax haven countries. It has been agreed by everybody that Ireland does not comply with any of the four criteria that are applied in the case of tax haven status.
No country does.
This matter was referred to in very clear terms by Mr. Angel Gurría, secretary general of the OECD, on Friday last in his very forthright comments regarding the progress being made by our country.
Is the Taoiseach still satisfied with regard to the constitutional status of the Economic Management Council vis-à-vis its role within the Cabinet? He stated the council has met on ten occasions. The Ministers for Social Protection and Agriculture, Food and the Marine, Deputies Burton and Coveney, and others have on occasion articulated their concerns at being excluded from economic decisions and indicated that the Economic Management Committee tends to make all of the decisions. We know, for example, that the council - which comprises four Ministers, including the Taoiseach - was central to the establishment of Irish Water. It also approved the payment of bonuses to the staff of Irish Water and agreed to the seamless transfer of senior staff from local authorities - to whom lump sums of up to €330,000 were paid, along with pensions - and, essentially, into other public sector jobs. The latter are earning very high salaries in the positions then now hold. The Taoiseach never commented on that matter when questions in respect of it were put to him. We all know about leaks in the system and other matters with which it will be necessary to deal. However, Irish Water is going to have to depend on local authorities to deliver, manage and maintain water supplies for the next 12 years. As a result, the essential purpose of Irish Water is to levy charges.
In the context of the Economic Management Council, many Ministers reacted with disbelief when they heard the various stories relating to Irish Water. In the first instance they stated that they were of the view that bonuses should not be paid. The Minister for Social Protection, Deputy Burton, was very clearly annoyed about the matter and stated that she was going to take it up with the Cabinet. Perhaps she did not know what was happening because everything was done through the Economic Management Council. I do not know whether she raised the matter with the members of that committee. The Minister of State at the Departments of Finance and Public Expenditure and Reform, Deputy Brian Hayes, said that it was a PR disaster. The Minister of State is very interested in PR these days because he is running for Europe. The Minister for Agriculture, Food and the Marine, Deputy Coveney, and other Ministers were also very annoyed about this matter. Perhaps that is because the Economic Management Council made all the running in respect of Irish Water. I do not know whether that is the case but there is a propensity among Ministers to disown decisions made by the Government on a regular basis.
I put it to the Taoiseach that there are serious questions with regard to the constitutional status of the Economic Management Council. As the Taoiseach revealed to the House, it meets frequently. This indicates, perhaps, the degree to which it dominates the formulation of policy and the fact that the remaining Ministers in the Cabinet simply rubber-stamp whatever the officials, the Tánaiste, the Taoiseach and the other Ministers on the council decide. Clearly, many Ministers are being left outside the loop and they seem to believe they can say what they like about Government decisions because they are not involved in making them in the first instance. Will the Taoiseach comment on that matter?
Will the Deputy repeat his final question?
In terms of the Economic Management Council making decisions, Ministers subsequently state that they know nothing about those decisions or that they do not agree with them. What happened in respect of Irish Water is the classic illustration of this.
I wish to confirm for the Deputy that all of the issues agreed by the Economic Management Council for recommendation to the Cabinet are the subject of formal decision by the latter. He will recall that there was a Cabinet security committee in place in the 1960s and the 1970s.
I was only born in 1960 so I do not really know what went on in the 1960s.
The Deputy often informs me that he is a historian, that he reads widely and that he knows all about these things. Deputy Adams knows about them as well. There was a security committee which comprised a number of members of the Cabinets which held office in the 1960s and 1970s.
Deputy Adams certainly knows about the security committee.
The Economic Management Council was established with the status of a Cabinet committee. It has only four members, namely, myself, the Tánaiste and the Ministers for Finance and Public Expenditure and Reform. I will not bother the House with the details of the agendas for each of our meetings but, as already stated, we discuss matters that go to Cabinet for decision. If issues need to be teased out before a matter goes before the Cabinet for discussion and decision, then that is what happens. This does not undermine the role of the Cabinet at all. The council has been in place for three years and I am of the view that it streamlines the process very well and removes the necessity to engage in long discussions at Cabinet. The council can define issues at its meetings and if there are further matters which required discussion by the Cabinet, then this happens.
Has the Minister for Social Protection, Deputy Burton, reconciled herself with all of this?
The Deputy referred to the loan relating to Irish Water being decided upon by the Economic Management Council. The latter does not make decisions on behalf of the Cabinet, rather it makes recommendations to the Cabinet for formal decision. The National Pensions Reserve Fund, NPRF, is independent in the context of its loan-making functions. It was a matter for the NPRF to decide whether it would provide Irish Water with an initial bridging facility. Given that Irish Water was not fully established at the time, the NPRF sought a Government guarantee in respect of the loan it was making to the company. That guarantee was provided by the Minister for Finance, following consideration, agreement and decision on the part of the Government. It was not the case of the Economic Management Council making the decision. The possibility of a guarantee of this nature is provided for in section 13 of the Water Services Act. In that regard and following consultations with the Minister for the Environment, Community and Local Government, Deputy Hogan, the Minister for Finance may guarantee, on such terms as he thinks fit, the due repayment by Irish Water of the principal borrowed and any interest which accrues on that borrowing. On 11 June 2013, the Government agreed that the Minister for Finance would provide such a guarantee in respect of the proposed bridging facility to be provided to Irish Water by the NPRF.
On 19 June 2013 the NPRF commission decided to provide Irish Water with a bridging facility on commercial terms which would cover expenditure on the domestic water metering programme and the establishment costs of Irish Water. The provision of the loan and the guarantee allowed BGE-Irish Water to award the meter installation and equipment contracts and to commence and accelerate the metering programme work which began in July 2013.
Deputy Martin will be aware of the perception - he may have said it himself - that this is a sort of a playing out to allow this thing to happen beyond the local and European elections. The Government will introduce its business and financial model well in advance of the local and European elections-----
When?
I cannot give the Deputy an exact date but I can assure him it will be well in advance. I am not talking about 48 hours, rather it will be a couple of weeks beforehand.
That is only three months away, 16 weeks.
I understand that. A great deal of work has been done.
March or April?
We want to be in a position to set out very clearly for people to understand that the costs involved are the costs required to provide the Irish consumer with a decent water supply and a platform for the future. It will deal with the comments such as that we are afraid to put out the business and financial model in advance of the local and European elections. Far from it. The people will be well aware of what is involved. The Government is conscious of what is involved. People have faced a lot of hardship and many challenges and this is the last imposition on them. We are 90% of the way with regard to taxation, cuts and charges and this is the last one. We will have that model out before the local and European elections.
I call Deputy Boyd Barrett on Question No. 6.
The cover-up about what is really happening with Ireland's corporate tax rate has to end. We need an open, honest, transparent and comprehensive debate about what is really happening with the corporate tax rate.
An eminent Trinity professor of finance has flatly and completely disagreed with the repeated assertions by the Government, the Minister for Finance and the Taoiseach that the 12.5% corporate tax rate is effective at that rate or anything even close to it. He has said it is a small fraction of that. People were rightly outraged by the CRC scandal and about the consultants in Irish Water but these are in the ha'penny place compared with what is at stake in this discussion. We are talking about billions of euro, potentially, of lost revenue to the State if the professor is even close to being correct. At the very least, whether one agrees or disagrees, it is not good enough to keep trotting out the standard line.
I am a member of the Joint Committee on Finance and the Public Service. Last year I tabled a motion in the committee asking that some of the biggest companies in the country - multinational corporations - who were at the centre of this worldwide controversy and were located and registered for business in this country should be brought before the committee to answer questions about how they are paying so little tax, or at least how they are being accused of paying so little tax as a result of them being resident or incorporated in this country. However, Fine Gael, the Labour Party and Fianna Fáil Deputies all banded together to prevent that discussion at the finance committee. That is a disgrace, given the billions of euro at stake. We discover that the 11.9% rate which the Taoiseach has quoted endlessly turns out to be, according to Professor Jim Stewart, a fictional firm with 60 employees which neither imports nor exports products. It is not a real firm and it is certainly not the firms that are at the centre of this controversy. It is a ceramics firm that does not import or export. In case any of the questions I have asked repeatedly about this should be confused or dismissed, I reiterate that we were never asking questions about ordinary small and medium enterprises. We know they pay the 12.5% rate and the commercial rates and all the rest of it. The issue is that a few hundred enormous corporations account for about 70% to 80% of all the pre-tax profits that are made in this country but are paying a fraction of those pre-tax profits in actual tax or, in the case of these companies registered here but not tax liable here, are paying nothing at all, which is another semantic, legal scam for them to avoid tax, and everyone knows it.
Will the Taoiseach discuss at the Economic Management Council the holding of a serious, honest and open debate where the main players, the different competing views, and some of the corporations at the centre of this controversy are quizzed, questioned and interrogated to discover whether this State is losing out on billions of euro in tax revenue when ordinary residents are being screwed to the wall with cuts, charges, pay cuts, unemployment and all the rest of it? Does the Taoiseach not have a responsibility, given the parlous state of our economy and the financial situation of many of our citizens, to look into this seriously and not just trot out the pat answers provided by the Department of Finance?
In the past year we have been told about a 2.2% rate. I showed a 6.3% rate by means of a parliamentary question. The Nevin Institute quotes a rate of 8%. The Taoiseach has just mentioned 10%. We have heard 11.9%, 12.3% and now the Taoiseach has referred to 14%, which is a new figure. The corporate tax being paid in this country is somewhere between 2.2% and 14%. Billions of euro are at stake in that difference. Even based on that, there has to be a serious investigation.
If the Deputy wishes to hear a reply I remind him there is only one minute remaining.
It depends on whom one believes. I refer to the comment made by Deputy Boyd Barrett. I confirm this matter has been discussed at the Economic Management Council and also by the Government which has authorised the Minister for Finance and me to participate in the international discussions at the European Council and the ECOFIN Ministers meeting and led by the OECD and 15 different sectoral committees in which Ireland participates fully and openly.
Deputy Boyd Barrett wants to believe the rate of 2.2% at the lower end of the scale is the effective tax rate. As I pointed out, there is no single methodology to evaluate the effective tax rates for companies operating in any country. The study to which the Deputy refers-----
What about the ceramics firm with 60 employees?
-----incorrectly counts the profits of Irish-registered non-resident companies as Irish. What that means is that the study included the profits of American companies that are not tax-resident in Ireland-----
They are registered here as brass plate companies.
The point is that we cannot tax profits that are properly attributable to other jurisdictions. The Deputy does not seem to believe the European Commission's report on taxation trends in the EU in 2013 which indicates an effective rate of 14.4% in Ireland, nor does he believe the PricewaterhouseCoopers report which shows an effective rate of 12.3% in Ireland. We are fully engaged. The Minister for Finance in the budget changed the legislation in respect of stateless companies because of the perceptional damage to our country. The 12.5% rate is very clear and is in legislation. The Revenue Commissioners publish the methodology, and the Revenue statistical report for 2012, which I am sure the Deputy will believe, refers to 2011 and, taking account of charges and deductions, amounted to €40 billion-----
What about the pre-tax profits of €70 billion?
-----while the total amount of corporation tax payable on those profits was €4.2 billion. It depends on whom one wants to believe. I like the professors, the theorists and the academics but this is politics and it is about decisions. We are involved fully, openly and comprehensively in having an international response to the situation where multinational companies can use the facilities or the conditions applying in different jurisdictions. We want an international response to an international phenomenon and we will get it.
Written Answers follow Adjournment.