Mr. Conor O'Brien:

These are losses for which a relief has been obtained and which the company has been able to offset against other profits. One could argue that where a business makes a loss of €1 million in one area and a profit of €1 million elsewhere, the number feeding into the numerator should be zero. However, the number that feeds in is actually €1 million if relief is not obtained for the loss.

We have not adjusted for any of these items in our 12.24% figure for the effective tax rate, which we consider to be a conservative figure. The effective tax rate is at least 12.24% and any talk of a 2% effective tax rate is completely wrong.

More recently, some of the debate has shifted a little towards stating that while the rate is probably 12%, Ireland allows deductions for payments made to other countries and this reduces the rate. Deductions which are normal deductions on normal transfer price principles are deductible in every sensible tax system in the world. This is not an unusual feature of the Irish corporation tax regime. The United Kingdom has a 20% standard corporation tax rate and applies a 10% rate on some items. It allows payments for royalties, interest and management fees, irrespective of whether they go to tax havens. If one were to try to merge or average the tax rate between a tax haven sister company of a UK company and a UK company, one would obtain a rate that is lower than 20%. Ireland levies a 12.5% tax rate, by and large, on the profits properly attributable to Ireland. If one wishes to rationalise how one gets in and around 12.2%, one can see from the Revenue paper that approximately €260 million of research and development tax credits were granted in that year, resulting in a reduced effective tax rate. On the other hand, approximately €2 billion of profits were charged at the higher rate of 25%, which applies to passive income. This more or less cancelled out the cost of research and development tax credits. That is rationally how one gets close to the 12.5% figure. This is not surprising because the only significant tax break other than the 12.5% corporation tax rate is the research and development tax credit.