Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance) | Oireachtas source

I move amendment No. 17:

In page 94, between lines 33 and 34, to insert the following: “Reports

37.Before the publication of the Finance Bill 2022, the Minister shall lay a report before the Dáil, on the impact of the change of the corporate tax rate to 15 per cent, and what measures are needed to ensure that this rate is a minimum effective rate which cannot be circumvented through the exploitation of reliefs allowances.”.

The amendment calls on the Minister to produce a report on the degree to which the 15% corporate tax rate, established as a result of the OECD base erosion and profit shifting, BEPS, process, to which the Government very reluctantly signed up, will be an effective rate of 15% rather than a nominal one.

The Minister will be very familiar with the reasoning behind this kind of amendment. We do not believe the 12.5% rate, which was already one of the lowest in the western world, was ever paid nor anything even close to that because the corporations exploit the array of allowances, reliefs and deductions which allow them to write down their taxable profits to negligible levels. The latest figure the Minister gave at the committee discussions on this was that the effective rate was just under 11%. That calculation can only hold water on the basis of the profits deemed taxable. The problem is that through the use of allowances, deductions and reliefs, these corporations manage to have far bigger profits deemed not taxable. I always find the figures pretty remarkable. I am surprised there is not more scrutiny of them. There is quite a bit of scrutiny at international level by the OECD. That was what prompted the global push for an effective rate because these incredibly profitable corporations were not paying the nominal rates they were supposed to. That is why there has been a push for an effective rate of 15% or more. We think it should be more. The average worker is paying about 20% of their income in tax and we think corporations should at least pay that level of tax on their profits. However, they do not because of the allowances and reliefs.

The figures are fairly dramatic. The Minister will be familiar with them but it is always important to put them on the record. Last year, 2020, the pre-tax profits of corporations in this country were an absolutely staggering €203.815 billion. That was up from 2012 when those profits were €74.775 billion. It is an incredible jump of a 172% increase in profits for corporations between 2012 and 2020. Think about the average worker and how much their pay has gone up over that same period. Is it 1% or 2% in real terms? Arguably, workers' pay has gone down when you take energy price hikes, the cost of living and of accommodation and so on, but the profits of the corporations have gone through the roof. These figures are rarely remarked upon. There is an occasional headline in the business sections of newspapers or the RTÉ website which allude to the staggering profits but there is no real scrutiny of it and less of the actual tax they paid.

Of the €203 billion in profits in 2020, which were up 172% since 2012, how much of that was taxed? We do not know for 2020 because the figures lag but we know that in 2019, when there was €195 billion in profits, only €106 billion, about 50% was taxed. The companies wrote down their pre-tax gross profits by €100 billion using a series of reliefs, deductions and allowances that are detailed by Revenue. I look at them every year. I find them fascinating. Some of the main headings under which they manage to write down their taxable profits include capital allowances, which are defined by Revenue as costs to the Exchequer, that is, the taxpayer. In 2018 the capital allowances were €9.4 billion. Intra-group transactions were €12 billion. That is a cost to the Exchequer. Reconstructions and amalgamations were €273 million. That is a cost to the Exchequer. Losses brought forward were €1.8 billion. Group relief was €536 million. There are slightly lesser ones such as the research and development tax credit which was €335 million. These are some of the big headings under which those gross profits are written down.

The capital allowances and intra-group transactions are in effect the corporations writing their own tax bills by ascribing values to their own intellectual property where they charge themselves for the use of it. One subsidiary of a company charges another subsidiary of the same company whatever cost it likes on the use of an intellectual property - on what is a patent, effectively. They can ascribe almost any cost to that they want. That allows them to write down their taxable profits. Thus the real effective rate is not the 11% the Minister will, I have no doubt, claim it to be in the next few minutes but 5.4% on average. It is very considerably less for the big IT and pharmaceutical companies that are responsible for the vast majority of these profits. We think that matter should be examined and we need to ensure they actually pay 15% on their gross profits.

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