Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance) | Oireachtas source

I move amendment No. 42:

In page 39, between lines 7 and 8, to insert the following:“22.(1) The Minister shall, within 6 months of the passing of this Act, bring a report on the potential to raise additional corporation tax revenue by closing down tax loopholes, examining the extended legitimacy and abuse of all corporate tax expenditures, exemptions, allowances and deductions, such as losses forward, R&D tax credits, the Knowledge Development Box, intra-group transactions, allowances on intangible assets and establishing a minimum effective tax rate of 12.5 per cent on gross trading profits and incomes.

(2) The Minister shall, within 6 months of the passing of this Act, bring a specific report and comparative study on the relative social and economic benefit of research and development tax credit expenditures, benefitting private corporations as against the investment of the equivalent funds into research and development in public universities.”.

We dealt with a specific allowance and a particular set of circumstances around the changes made in 2014, but this amendment relates more to the bigger picture of the whole array of allowances, deductions and reliefs available to corporations. It is worth saying the same groups we have just talked about are the major beneficiaries of this: the Apples, Googles and Facebooks and probably the pharmaceutical companies and so on. A relatively small number of companies benefit from this vast array of allowances, deductions and reliefs. What we seek in moving this amendment is a really detailed look at these, with a view to trying to close down all these loopholes that are being exploited to reduce the effective rate being paid by a small number of corporations. I think the vast majority of small and medium-sized enterprises in this country do pay in or around the 12.5% because they cannot for the most part utilise many of these reliefs. It is the big players, the favoured, pampered few of these extraordinarily profitable corporations, that are the big beneficiaries and have the accountants, the consultants and the lawyers and so on to maximise the benefit they derive from all these reliefs. The scale of the tax benefits they derive is quite extraordinary. We have talked about the intangible assets. Another one I came across looking at Revenue's list of these reliefs and allowances is the one entitled intra-group transactions. I would not mind hearing a little more about this one, which was a relief that cost the Exchequer €2.9 billion in 2015 and €9 billion in 2016. Again, it is one of these reliefs where we see a staggering increase over one year.

If the officials want the document to which I have referred it is the second page of a Revenue document titled Cost of Tax Allowances, Credits, Exemptions and Reliefs.It details the various reliefs. Losses, including capital allowances brought forward from earlier years, were mentioned earlier, and account for €2.7 billion; group relief costs €254 million; research and development tax credit, €700 million; and capital allowances totalling €6 billion. The total of these, when we add them all up and set them against profits, is extraordinary. Mr. Seamus Coffey remarks on this in what is a very good paper. As I have said before, I do not agree with his ultimate conclusions, as I do not think they are radical enough. However, he comments on the enormous increase in these deductions and allowances. He writes that they have increased from €18.9 billion in 2003 to €97 billion in 2015. Those are all tax loopholes that a small number of corporations benefit from. I repeat, the increase is from €18.9 billion to €97 billion, an extraordinary jump by any standards.

If the small and medium enterprises are for the most part actually paying the 12.5% rate, this explains how a small number of corporations benefitting from these reliefs have actual effective tax rates of 1%, 2%, or in some cases less than 1%. At the same time, their total aggregate profits, as I mentioned earlier, have gone from €76 billion in 2012 to €149 billion, more than doubling. There is no doubt that this doubling of profits is attributable to the same small group of companies. Yet the tax that we get from it does not double. If gross trading profits double over that period, then one would think our tax revenue would double. Yet that is not the case. The increase is from about €4 billion to about €6 billion. That is a 50% increase in corporate tax revenue, roughly speaking, but there has been more than a 100% increase in profits in that period. How does one explain that? It is explained by the fact that we have had this dramatic increase in allowances, reliefs and deductions.

Do the members not think we should do something about that, and move towards some sort of minimum effective rate so that these players would be forced to pay a fair contribution in tax, rather than doing what we are doing at the moment? If I give the best interpretation of what the Government is doing, it is chasing them around, trying to catch up with them as their lawyers and accountants engineer ever more imaginative and innovative ways to get around and exploit the tax code, to open up loopholes and so on. That is the most benign explanation of what is happening.

However, I believe it is worse than that. I think there is collusion. Even if I am wrong, surely the way to deal with it, to stop this behaviour, to stop this exploitation of loopholes and to make these people pay a fair proportion of their enormous profits in tax, is to introduce some sort of minimum effective rate. I would go further. I would do that and raise the nominal rate. I know that would be unthinkable for the Minister but could we not at least introduce a minimum effective rate, so that they actually pay the 12.5%?

These companies would still be making staggering levels of profit. I do not believe they would leave the country if we did that, because even if they actually pay the 12.5% they would still be paying significantly less here than they are in most jurisdictions in Europe, at least in western Europe, which is where they want to be. I am sure they want to be in English-speaking western Europe, so our real competition for a lot of this investment is probably only Britain and Scotland.

Would that not be a fair and reasonable thing to do? Would it not be fair and reasonable, as this amendment suggests, to at least look at all of these allowances and deductions, examine how they are being exploited by these corporations, and look at ways of trying to increase the tax take from them?