Wednesday, 16 May 2018

Ceisteanna (6)

Richard Boyd Barrett

Ceist:

6. Deputy Richard Boyd Barrett asked the Minister for Finance his plans to close corporate tax loopholes for special purpose vehicles, SPVs, real estate investment trusts, REITs, banks and corporations that are paying negligible amounts of tax as a result of the loopholes in the context of the next budget; and if he will make a statement on the matter. [21723/18]

Amharc ar fhreagra

Oral answers (6 contributions) (Ceist ar Finance)

The debate about the fiscal space is important in terms of knowing what we have available for public expenditure and investment. Regardless of what way one calculates it, however, there is not enough for housing, health, infrastructure investment and education. What will the Minister do about the myriad loopholes benefiting corporations, which we got a glimpse of with the Apple scandal, special purpose vehicles, SPVs, real estate investment trusts, REITs, and vulture funds? There is a host of tax expenditures which are not properly scrutinised and that result in very low, sometimes negligible, corporate tax payments by very profitable corporate interests. Is the Minister going to close some of those loopholes to increase the tax revenue available for public expenditure and investment?

The Deputy's question is quite wide-ranging and it is not possible in the time allowed to address in detail each of the categories listed, so I will focus on the significant work undertaken in recent years, which is still ongoing, to address tax avoidance at domestic and international levels.

Corporation tax is a significant element of Exchequer tax revenue. Projected corporation tax receipts for 2018 are more than €8.5 billion, representing 15.7% of projected tax receipts. Over and above this, companies also generate substantial tax revenues under other tax headings, including payroll taxes and VAT. The long-term sustainability of corporation tax receipts and of the corporation tax system is therefore a key consideration in every budget cycle.

In 2016, my Department commissioned an independent review of the corporation tax code by Mr. Seamus Coffey. The review was completed and published in June last year and contained 18 recommendations, some of which Mr. Coffey noted were very technical in nature and would require further consultation. I commenced implementing the recommendations last year in budget 2018 with the reintroduction of the 80% cap on capital allowances for intellectual property, and a consultation was held early this year on the implementation of the remaining recommendations. More than 20 submissions were received to this consultation, many of which were detailed and highly technical. My officials are reviewing these submissions and it is my intention to continue this process of open engagement with stakeholders, including my colleagues in the Dáil, through the publication of a roadmap for the implementation of the Coffey recommendations and the anti-tax avoidance directives.

I agree it is wide-ranging, but these tax expenditures and tax reliefs are the dirty great secret of the Irish economic story. They must be examined forensically to see if money being handed back to corporations in allowances and deductions should be invested in public infrastructure and public services. Consider the jump in trading profits from 2014 to 2015. They go from €98 billion to €149 billion in one year. It is a massive jump. How much were the deductions and allowances for this record level of rocketing profits? There was €66 billion in allowances of various types and various deductions of €30 billion. There was €149 billion in profits but almost €100 billion in loopholes. The income that is taxed, therefore, is a fraction of the profits being made. These loopholes are research and development tax credits, tax credits related to intangible assets, loopholes related to intergroup transfers, losses forward so the banks do not pay any tax, capital allowances and a range of others. Will the Minister close some of these or at least examine their value for money?

I am committed to taking on board all the input I have received from the consultation on the Coffey report to ensure we can continue to have a tax code that is both competitive and deals with issues of international concern.

However, where I differ with the Deputy very strongly is in noting that a deduction is not the same as a loophole. Companies of all natures are entitled and are able to reduce some of their tax liabilities on the basis of economic and business activity that they deliver, and under many of the clauses the Deputy has referred to that is exactly what is happening. On the other side of the balance sheet from what the Deputy has referred to are jobs that are created in Ireland and employment and investment that happens in Ireland. All of this is playing a role in our bringing our economy to full employment later in the year.

Yesterday, there were about 100 film workers protesting outside the Dáil for the second week in a row. Does the Minister know why they were protesting? They were there because €70 million is given out in tax reliefs to the film industry. The film industry came to the Oireachtas a few weeks ago and said that it accounts for 17,000 jobs. There are not 17,000 jobs. There are no jobs as a result of that money. Currently, I would be surprised if there were 500 people working, and most of those who are will not have a job in a few weeks. We are not examining whether real jobs are being created or whether real investment is happening. In fact, in his report Mr. Seamus Coffey points out that the tax breaks these firms are getting are so high that the profits are driving up our gross national income so that we have to pay bigger contributions to the European Union, but the tax breaks mean that we do not get the benefit on the other side in tax revenue. Taking research and development as an example, €708 million last year went to the big corporations in research and development tax breaks. Would it not be better to spend that money in the public universities, rather than giving it away to Apple, Google and Facebook?

When the Deputy looks at the companies who are accessing research and development grants, will he also be cognisant of the fact that they are creating employment in Ireland? Many of the companies the Deputy has referred to are very large employers. Their investment, which many other countries wanted, has been secured in Ireland. The different clauses the Deputy refers to, such as grants for research and development and the recognition of such within tax liabilities, are vital ways in which we attract investment to our country and create work. In response to the Deputy's point about the need for further investment in higher and further education, I had hoped that he would point to the fact that the investment plan in Project Ireland 2040 includes a very significant increase in Exchequer funding for higher and further education. I believe that most of the research that takes place there should be funded through the Exchequer.