Mr. Seamus Coffey:

I am not familiar with it. I will look it up. In the main, when it comes to the presentation, in my opening statement I would not have referenced the table here, but you would always know your audience, and we have had a number of discussions about the figures in this table before. That was maybe one reason for including it, and I am glad the Deputy has picked up on it. My opening statement focused a lot on the credits and reliefs which come after taxation has been calculated - the research and development tax credit and the double taxation relief. What we are looking at here with regard to deductions is where people have spent money, so the Deputy is absolutely right that the figure for capital allowances is huge, and Revenue has a figure of €76 billion in deductions under capital allowances for 2020. However, that is a deduction of expenditure - it is the treatment of capital expenditure. Somebody has bought an asset, whether it is a machine, a factory or, as we know, intellectually property, IP. They have bought something, so they have incurred an expense.

Should we have concerns about it? Possibly, but not necessarily from an Irish perspective. One concern with IP is that almost all of it is internally generated. This is US companies trading licences between US subsidiaries. They were previously in Bermuda and because transfer pricing rules changed, that could not continue, and because of the abolition of deferral in the US tax code, it was not really worth their while to do it, so they had two choices, namely, to bring the IP back to the US, as many companies have done, or move it elsewhere where they have substance. Many of those companies have substance in Ireland, so they have moved their IP to Ireland. The Irish subsidiary bought it and it incurred a huge expense in buying it, and the capital allowance is just how that expenditure is treated for tax purposes. Yes, it is different to salaries, electricity and other costs that firms incur, but it is an expense that the firm has incurred.

One concern would be that it is these intragroup transactions of US companies trading with themselves. The second concern would be where the IP came from. If this was coming from countries that had applicable capital gains taxes, the company selling would be paying significant capital gains tax on the IP it is selling to Ireland. However, we know it is coming from Bermuda and the Cayman Islands, where not only is there no corporation tax but there is no capital gains tax, so no tax is being paid there.