Mr. Seamus Coffey:

I do not dispute the final point made by the Deputy. He is correct that our EU contributions are based on gross outcome. Figures from the Revenue Commissioners suggest the net income is nil such that the additional corporation tax is nil in the years for which we have data. On pricing, Irish legislation requires companies to value assets at the market price. This should be linked with the profit generated by them. The assets are generated initially by the US tax code that allows companies to divide their profits into foreign and domestic for US tax purposes. Up to now, the foreign profits had been declared on sandy beaches in the Caribbean but changes in Ireland and coming down the track internationally are limiting companies' ability to do this, rightly so. Therefore, companies are moving assets to where they have substance.

The price should reflect the profits being generated. For the early years, the capital allowance available and profit generated are similar, which suggests the pricing is reasonably accurate. In other words, the valuation is reflective of the profit being generated. If there was a mismatch such that the capital allowance being claimed was much larger than the profit being generated, it would suggest there was a problem and companies would be able to claim capital allowances long into the future if an excess price was being applied to them. The fact that they are close means that in the future if the companies become even more successful and generate even more profits, the capital allowance will remain fixed. It is based on the initial expenditure outlay to purchase the asset, in respect of which a company may claim an amount each year. If the profits increase, a company cannot bump up its claim for a capital allowance because the allowance is fixed based on the type of depreciation chosen. Also, the capital allowances will run out at some point.

I share some of the Deputy's concerns, but the legislation does require an asset to be valued at the market price. The data available to date suggest the price and profit are aligned, but the scale and the impact on our EU contributions are undoubted.