Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I propose to take amendments Nos. 69 and 70 together. The trading profits of companies in Ireland are generally taxed at the standard corporation tax rate of 12.5%. Some of the main features of the current corporation tax regime are its simplicity and the fact it applies to a broad base. Our growth-friendly tax system has contributed to improvements in living standards for all citizens and is consistent with the OECD's recommendations for how best to support economic growth.

Deputies will be aware that a range of analysis has found that the effective corporation tax rate in Ireland is between 10% and 11%. This includes research conducted by my Department, co-authored by an independent academic, reports by the Comptroller and Auditor General and annual data published by the Revenue Commissioners. While this percentage is lower than the 12.5% rate, this can be attributed to the availability of a small number of targeted tax measures that may lower the effective rate of corporation tax paid. Furthermore, while our headline rate is low, the yield from corporation tax revenue constitutes a substantial portion of Exchequer revenues. Corporation tax was the third largest tax head in 2019, accounting for more than 18% of total net tax receipts. For the year to date, corporation tax receipts have continued to perform well, notwithstanding the current economic circumstances. Sustained corporation tax receipts are critical to maintaining Exchequer revenues and funding the Government supports to both individuals and businesses that have been affected by this disease.

It is my view that any increase in corporation tax rates would be detrimental to our economy. Deputies may be aware that the Department carried out a comprehensive economic assessment of our corporation tax policy in 2014, which found that any increase in our tax rate would have had a significant effect on the level of investment within our country. The implications are very clear. An increase to our 12.5% corporation tax rate could be expected to damage inward investment flows and reduce investment in economic activity in our State, with negative effects on the overall corporation tax yield and employment.

On the question of so-called loopholes referred to by Deputies, all companies and self-employed individuals are entitled to take a deduction for legitimate business expenses when calculating their taxable profits. In addition, Ireland offers a small number of tax measures designed to support particular policy objectives that are clearly set out in law and available to any qualifying company. Both my Department and Revenue publish detailed information annually outlining the cost of tax expenditures. Clearly, these statutory deductions and reliefs are not loopholes. The only way for such reliefs and incentives to be introduced or amended is through the normal legislative process. In addition, Revenue provides guidance on the conditions for relief and carries out compliance interventions to ensure the accuracy of amounts claimed.

Furthermore, the tax code is under continuous review to ensure it operates as intended. My Department and the Revenue Commissioners work together to bring forward the necessary legislative provisions to address any potential issues that may arise. Ireland is fully engaged in the international process of tax reform and in this regard works in conjunction with EU and other OECD member states. By doing so, we have introduced extensive reforms in recent years to tackle aggressive tax planning. Some of the many actions taken in this regard include reform of company residence rules and transfer pricing rules, the introduction of new controlled foreign company rules, anti-hybrid rules and an exit tax, and improved transparency reporting requirements and information exchange.

In summary, I believe that the measures proposed to increase the rate in our corporation tax policy would be harmful to jobs and to the investment that is playing such a critical role in providing tax to our country at a time in which it is needed and providing jobs in our country at a time in which they are so badly needed. It is for those reasons that I will not accept the amendments.

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