Simon Harris (Wicklow, Fine Gael) | Oireachtas source

Before we left I had just acknowledged the fact that we had published the technical paper on the effective rates of corporation tax in Ireland. This is a very useful exercise in terms of looking at various methodologies and at various questions that have been posed at this committee and in many public and media fora over recent years on the effective rate. We are pleased that it is in the public domain. It is an excellent resource and it is good to see it being utilised. One of the objectives of the paper is to be as open and fair in the analysis as is possible, so all the figures are in there. For that reason, the Department commissioned an external academic, to whom I have already alluded, to ensure the work is seen to be as objective as possible. I know the committee would accept the objectivity of that individual due to its own work with him.

The paper examines three different methodologies used in the calculation of effective rates of corporation tax in general. It then analyses eight different figures that are quoted in respect of Ireland in greater detail. Each of these different approaches is relevant, depending on the nature of the question being addressed. In attempting to assess the effective corporate tax rate applying to the total profits earned by companies in Ireland, the paper concludes that the approach based on the national aggregate statistics from the Revenue Commissioners and the Central Statistics Office is the most suitable. The paper finds that the effective rates of corporation tax, as measured according to the statistics from these two sources, are reasonably close to the headline rate of 12.5% and that the difference is mainly accounted for by double taxation relief and a small number of other reliefs, including the research and development tax credit. Since 2003, the effective corporation tax rates on the CSO measure of profit, net operating surplus, and the Revenue measure of profit, taxable income, have averaged 10.9% and 10.7%, respectively. In more recent years there have been differences between the two figures. The CSO measure was 8.4% in 2011 and the Revenue measure was 10.4%. This is due to the existence of large losses in the system, which can be offset against profits for tax purposes, but are not counted in the CSO figures. On the basis of this extensive analysis, we are comfortable that companies in Ireland are paying the appropriate rate of corporate tax on profits generated by those companies in Ireland.

Deputy Doherty has specifically proposed that the Minister for Finance prepare a report on the effective rate of tax charged to domestic businesses in this State and, separately, to multinational corporations, and analyse the impact of this Finance Bill on lowering or raising the effective tax rate. On the effective rate paid by multinationals compared with domestic companies, I draw the Deputy's attention to research undertaken by the Revenue Commissioners and published on budget day as part of the broader economic impact assessment of Ireland's corporation tax policy. The Revenue research, en titled A Note on the Context and Concentration of Corporation Tax Payments, used a new Revenue marker to identify corporation tax payments from the foreign-owned multinational sector. This new Revenue marker is still under development, but the indications from Revenue to date are that this marker is quite comprehensive and that revisions to the data in future are unlikely to be significant. Using this marker and applying the relevant methodology outlined in the technical paper, namely, dividing the amount of tax paid by the amount of taxable profits of companies, the effective rate applied to domestic businesses was 7.7% and that applied to multinational businesses was 11.1% in 2012. Given the detailed material already produced by the Department of Finance and the Revenue Commissioners and the need to allocate scarce resources most effectively, the Minister for Finance cannot accept the Deputy's amendment.