Mr. Seamus McCarthy:

The Revenue Commissioners collected a net €7.35 billion in corporation tax receipts in 2016. This was the highest level of corporation tax receipts recorded in any year, accounting for 15.3% of net tax and duties receipts. Receipts in 2016 were 7% up on the previous year and followed an exceptional and unexpected 49% increase in net receipts recorded for 2015. My examination was carried out to try to gain a better understanding of what factors lay behind the 2015 increase. Although corporation tax applies to a very broad base of companies, the receipts are highly concentrated among a small number of companies and in a number of key sectors. In 2016, some 70% of receipts were paid by the top 100 taxpayers or 0.2% of taxpayer companies. By comparison, the top 1% of corporation taxpayer companies in the UK accounted for 54% of corporation tax receipts.

Three sectors of the Irish economy accounted for around 70% of the total corporation tax receipts in 2016, namely, financial and insurance activities, manufacturing, including pharmaceutical manufacturing, and information and communications service providers.

Members will be aware that the effective rate of corporation tax paid by a company may differ from the statutory or headline rate of corporation tax due to the impact of a range of allowable tax reliefs. The availability and use of such reliefs complicates international comparisons of corporation tax rates and also impacts on the amount of tax received in Ireland from year to year. The method used by the Revenue Commissioners defines the effective tax rate as tax due as a proportion of taxable income. The standard statutory corporation tax rate applicable to most trading income is 12.5%. Using the Revenue approach, the effective tax rate that applied to all companies in Ireland in 2015 was an estimated 9.8%. I understand that since the report was finalised in September, Revenue has received more complete data in this regard. The accounting officer will be able to outline the impact of this.

The examination looked at the effective corporation tax rates of the top 100 companies in Ireland ranked by tax due and ranked by taxable income. For the top 100 companies ranked by tax due in 2015, the average effective tax rate was 12.4%. The effective tax rate averaged 9.3% when the top 100 companies are ranked on the basis of taxable income. As indicated in the diagram on screen now, eight of the 100 companies with the highest taxable income had an effective tax rate of zero, including some who had negative rates, that is, instead of paying corporation tax, they received rebates. A further five had an effective rate of less than 1%. These very low effective rates reflected the use by the companies of significant tax credits and reliefs, in particular, double taxation relief and research and development tax credits. However, it should also be noted that 79 of the highest earning companies had effective tax rates of 10% or more and that almost two thirds of the highest earning companies had effective tax rates of 12% or more.