Eamon Gilmore (Dún Laoghaire, Labour) | Oireachtas source

The issue of effective tax rates has been the subject of a number of public discussions in the past 12 months. It has been acknowledged by the OECD, the European Union and the G20 that international tax planning is an international issue, and the Government is working with these organisations to reach a solution.

The recent coverage of multinational profits by Apple was based on historical accounts from 2004 to 2009 which used a stateless company structure. We addressed the issue of stateless companies in budget 2014 and the Government is fully committed to the OECD base erosion and profit shifting, BEPS, project. The OECD is progressing that project, with the support of the G20, to deal with this international issue. There has been an allegation that Apple had some type of special deal with Ireland. We have consistently rejected that allegation. Indeed, Mr. Tim Cook, CEO of Apple, corrected the record in that regard in May last year when he stated at the All Things Digital D10 conference, "We have no special deal with the Irish Government".

With regard to the allegation that Apple paid only $36 million of tax on profits of $7.11 billion, it is important to clarify that there are two separate scenarios that are often confused in discussions on the effective rate of corporation tax. The first is the global rate of tax that is paid by multinational companies which operate across a number jurisdictions. This is a blended rate which takes into account the amount of tax charged across all countries in which a company trades, not just in Ireland. The extremely low effective rate figures that were recently quoted in Apple's case and attributed to Ireland are based on a flawed premise. They are estimated by dividing the amount of Irish tax paid by a total profit figure that includes substantial profits made by companies that are not tax resident in Ireland. The figures are running together the profits earned by group companies in Ireland and in other jurisdictions and incorrectly suggesting that Irish tax does or should apply to both.

Ireland cannot tax profits that are properly attributable to other jurisdictions. The ability of some multinationals to lower their worldwide rate of tax using international structures reflects the global context in which Ireland and all other countries operate. The best way to address this issue effectively is for countries to work together at international level. The appropriate action is being considered in this regard by the OECD as part of its project on base erosion and profit shifting. Ireland is participating fully in that process.

The second issue is the effective rate of tax applying in individual countries. The domestic rate of tax paid in Ireland is within the control of the Irish tax system, and Ireland is responsible for the amount of Irish corporation tax that is charged here. All companies operating in Ireland, both domestic businesses and multinationals, are chargeable to corporation tax at the 12.5% rate on the profits that are generated from their trading activities here. A higher 25% rate applies in respect of investment, rental and other non-trading profits as well as certain petroleum, mining and land-dealing activities. Chargeable capital gains are taxable at the capital gains tax rate of 33%. Some other countries have a higher headline rate of corporation tax, which is supplemented by a high number of tax reliefs that reduce the overall rate of tax paid. By contrast, the approach in Ireland is transparent. We have a competitive headline rate of corporation tax, which is applied to a broad base.

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