Seán Fleming (Laois, Fianna Fail) | Oireachtas source

I want to deal with the research and development tax credit. I tabled two parliamentary questions on the issue in the past week or so. I tabled one last night and one on 13 February. I asked for a breakdown of the tax credit based on different bands of tax payment by various companies. I got some information in one reply and more in another on the number of people involved. It was 1,535 companies for 2015 and 1,486 companies were able to claim R&D tax credit in 2016. The range of credit available by way of reduction in tax for those between €1 and €50,000 was 797 people. They were the small guys. I have information on the companies ranging from €50,000 to €100,000. The one people will be interested in is that Revenue said 13 companies were able to claim the R&D tax credit where the reduction of tax was in excess of €5 million in each of the 13 cases. I asked for the figures over €10 million and €50 million but, understandably, Mr. Cody said he would not give that information as it might identify the taxpayer and he aggregated the numbers over €5 million and that came to a total of 13 companies.

The first question related to the number of companies and the second question dealt with the amount of money. The Minister for Finance gave me the information but I am sure Revenue had an input into the reply. On the amount of corporation tax in respect of amounts payable over €5 million, which was 13 companies, the amount involved in 2016 was €440 million, which represented 65% of the total. I think I am correct in saying that. In total, 13 companies out 1,486, less than 1% of the companies, were able to claim research and development tax credit in the amount of €450 million out of a total of €674 million in 2016, which was 65% of the total. Mr. Cody gave the figures of 80% and 40% but in reality when I look at the figures less than 1% of the companies have claimed 65% of the research tax credit on the basis that they are doing the most research. There is a logic to it, but I still want to put the figures out there. Part of our remit is to provide information to the public so that they can understand the corporation tax situation a little bit better.

Those companies between €1 million and €5 million had R&D tax credit available to them of more than €100 million and there were only 49 companies in that group. Understandably, when I look at those two groups and all of the companies that were able to avail of the tax credits I work out that there are 188 companies over the four years, which gives an average of 50 companies per annum, that were able to claim €1.816 billion out of a total of €2.356 billion, namely 81%. The figures I was given relate to 2013, 2014, 2015 and 2016. An average of 40 companies has claimed more than 80% of the credit over the four years. That is a quite a lot in those particular areas and I wish to highlight that.

On the top 13 companies that I mentioned that were able to get 65% of the amount in 2016, it was an average of €34 million per company. Some of them might have been just over it and others were way over it. I estimated the average for those companies was €34 million in 2016 and €36 million in 2015. I think I am correct in my interpretation of those replies to my parliamentary questions. If that is Mr. Cody's general understanding we will not quibble over it. I want to put that on the record because we all talk about the 1,400, the majority of which are small companies but they are getting peanuts in terms of the value of the tax credit. I do not dispute the value I just want people to have a good understanding of those tax credits.

We wrote to Mr. Cody last weekend and we appreciate that we gave him short notice to provide a reply. He was good, as I think he has replied to each of the six questions we asked last week. We have the briefing note in front of us since yesterday. Some of the replies were easy to come by as they were taken from the annual reports and others probably required a bit of extra work. I wish to hone in on one which we have touched on already, namely, corporation tax and carrying losses forward. Losses forward are covered in Appendix No. 7 in the documentation supplied. The information is on screen now. That is where companies that had incurred losses in previous years can carry the losses forward against profits in a future year to reduce their tax liability. We have mentioned the banks already in our general discussion on this issue. The total amount on the schedule that I have been given for companies and corporations in Ireland carrying forward losses against future tax liabilities – I ask people to wait for this figure – I think I am right when I say it - is €218 billion, not million. That is losses forward by the corporate sector to be offset against profits in future years. We are told €40 billion relates to losses that are not expected to be used because those companies might be in liquidation but they had losses forward going into liquidation. That still leaves €178 billion of losses forward in the corporate sector to be offset against future corporation tax receipts. Mr. Cody can understand why the PAC is concerned about the receipts and potential risk to the taxpayer of that big overhang. Obviously the biggest sector of that is the financial and insurance activities which involves €124 billion, and that is the majority of the amount.

For the record, my reading of that is a fair representation. It is important that when we are drafting a report our facts are correct. I was staggered by the scale of the amounts involved. It is probably not news to some of the witnesses but it is a phenomenal figure that has not perhaps been discussed in the public arena.

We do not expect it to be carried forward next year, with no corporation tax received. In my letter to the witnesses, I was really asking for an age analysis of this. How far back does this go? Is it recent or does it go back over five, ten, 15 or 20 years? Did the witnesses say they could not provide an age analysis and that the data is not collected in that manner? Some of this could conceivably be very old and there might not be much prospect of recovery. However, I would have thought that an age analysis would be available. How much of that €218 billion is from last year or from the year before? I know some comes forward each year and is utilised each year. I am surprised and a bit disappointed that the witnesses have not been able to provide an age analysis. It would have helped to inform public debate on corporation tax. I also feel it is important in light of the facts we mentioned with regard to some of the key banks in terms of the rule changes involving ECB issues and capital ratios. The banks may not be paying corporation tax for many a year to come if there is that level of losses forward in the system.

Has the Department of Finance considered a sunset clause on the losses forward? Most people have a period of time to draw down money, but the idea that these losses can be carried forward indefinitely is probably not fair to the taxpayer into the future. It has the potential to have a significant impact.