Tuesday, 17 December 2019

Ceisteanna (118)

David Cullinane


118. Deputy David Cullinane asked the Minister for Finance the estimated full-year revenue raised from a universal charge of 0.1% on total income and gains before deductions and charges on companies; and if he will make a statement on the matter. [52782/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I have assumed for the purposes of this question that the measure of income and gains to which the Deputy refers is adjusted trading profits before deduction of losses, capital allowances and other charges.  I am advised by Revenue that the yield from introducing a new charge of 0.1% on this measure of income and gains of companies, before all deductions and charges, is tentatively estimated to be about €170 million in a full year. This estimate assumes no behavioural change on the part of the companies.

The types of deductions that the Deputy is referring to would include deductions for capital allowances and trading losses. The provision of capital allowances for capital expenditure is a standard feature of both corporation tax and income tax systems.  It recognises the cost incurred by businesses on capital assets that are used in the business over a lifespan of multiple years.  Such costs are amortised in the financial statements of businesses.  This amortisation (depreciation) is added back in the calculation of adjusted trading profits and relief for these costs is allowed instead under the capital allowances system.

It is also standard practice in all OECD countries to allow trading losses to be carried forward into future years, in recognition of the fact that business cycles operate over more than one year.

I would also note that a charge of the nature proposed by the Deputy would not be in keeping with our corporation tax system and the certainty that provides to business, and nor would it be coherent with the income tax system applying to business profits of sole traders and partnerships.