Joan Burton (Dublin West, Labour)
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38. To ask the Minister for Finance if his attention has been drawn to recent media reports regarding the report by a charity (details supplied) noting that 16 of the top 20 European banks operating here are paying an effective tax rate of 6% or less and that this is well below the levels outlined by the Government and IDA; and if he will make a statement on the matter. [16514/17]

Joan Burton (Dublin West, Labour)
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What are the Minister's views on the recent report by the Oxfam charity noting that 16 of the top 20 European banks operating in Ireland through the IFSC and so on are paying an effective tax rate of between 2% and 6%, which is well below the corporation tax rate of 12.5%? Is the Minister concerned at such blatant tax avoidance or evasion using Dublin given that the Government has sought to defend its international reputation by pointing to its work, particularly when the Labour Party was in government, to ensure that we supported the OECD tax reform process?

Michael Noonan (Limerick City, Fine Gael)
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I thank the Deputy for her question. I am aware of the report which was published by Oxfam on 27 March. The report makes a number of comments about the level of tax paid by certain banks in respect of their operations in each country of operation, including Ireland. The report also asserts that 31 different jurisdictions, including Ireland, should be considered tax havens. I understand that the report relies on publicly available data published by banks under the capital requirements directive, CRD IV. The report takes this data and uses it to assert the effective tax rate suffered by banks in the countries in which they operate. While I will not comment on the tax affairs of individual taxpayers, there are a number of reasons that using this data to assert a company's effective tax rate may create a misleading picture.

Calculating a company's effective tax rate requires looking at a company's profits as calculated under Irish tax law and the amount of tax charged on those profits under Irish tax law. This information is not included in the public country-by-country reports. For this reason, caution is needed when using the country-by-country information when commenting on a company's tax affairs. For example, the profit figures filed in the CRD IV reports generally relate to profit calculated for accounting purposes. Companies, however, do not pay tax on their accounting profits, but rather on their taxable profits. There are a variety of legitimate differences in how these figures are calculated in each country.

For example, all capital expenditure is treated differently for accounting and tax calculations.

Similarly, the tax on profit or loss figure in the publicly disclosed information may relate to tax actually paid over to Revenue rather than the tax charge suffered by the company. For example, where a company has losses carried forward from a previous year, this would reduce the amount of tax that must be paid over but does mean the company is not subject to a tax charge on its profits.

Officials in my Department are examining the report in more detail and have arranged a meeting with Oxfam to discuss the report's contents.

Additional information not given on the floor of the House

I would like to point out that all companies in Ireland pay the standard 12.5% rate on their trading profits which are generated in Ireland. Higher rates of 25% and 33% apply to certain profits. My Department has previously worked with Mr Seamus Coffey, who is currently conducting a review on the corporation tax code, on a technical paper to provide clarity about the seemingly conflicting figures and methodologies for the effective rate of tax paid by companies in Ireland. This paper found that the effective rate paid nationally is between 10.3% and 10.7%.

I strongly reject the report's suggestion that Ireland is a tax haven. There is no clear analysis as to why Ireland would be considered as such and we do not meet any of the vague criteria that the report suggests are indicative of tax havens. The report itself notes that international institutions, such as the IMF and OECD, do not consider Ireland to be a tax haven.

Joan Burton (Dublin West, Labour)
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As the Minister knows, and he has been quite concerned about it, Ireland's reputation on tax is a very tricky issue, particularly in the context of Brexit. There has been a demonstrable attack on Ireland by various figures from the Commission, and other countries in the EU 27 have made comments on Ireland's tax position. I thank the Minister for the detail in his answer, but it is extraordinary that banking companies which broadly utilise the IFSC for investment banking purposes in a regime where corporation tax is a very attractive 12.5% would be able to achieve a tax rate of between 2% and 6%. This is not good news in terms of what this country has said in respect of our very genuine participation in the OECD BEPS process.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Thank you, Deputy.

Joan Burton (Dublin West, Labour)
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The Minister has not actually denied what is in the Oxfam report. He has made various equivocations on the Oxfam report. We all know the profit calculator for tax for accounting purposes is rather different, but over time the Minister knows, or his officials have told him, in fact this washes out.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Thank you, Deputy.

Joan Burton (Dublin West, Labour)
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Yes, a capital expenditure can be claimed upfront, but ultimately the differences wash out. I am very disappointed in the content of the answer.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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We will go back to the Minister now.

Joan Burton (Dublin West, Labour)
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Will the Minister make available a detailed briefing on this issue because it is central to our reputation?

Michael Noonan (Limerick City, Fine Gael)
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As I said in the course of my reply, we have invited Oxfam to meet the officials to discuss in detail the claims it is making. I agree with the Deputy that a lot of adverse comment has been made about Ireland and the tax regime of 12.5% here. A lot of this is driven by those who compete with us for foreign direct investment and it is not true. Many of the comments by certain Commissioners is misguided and based on a misunderstanding. On the other hand, we have lot of statements, principally from the OECD, which has confirmed that Ireland is to the forefront of its tax reform agenda and that Ireland certainly is not a tax haven and does not subscribe to any of the features of a tax haven. Clearly there is a risk of reputational damage from reports such as this, and my officials and tax people would like to meet Oxfam so it can justify the claims it has made-----

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Thank you, Minister.

Michael Noonan (Limerick City, Fine Gael)
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-----and point out to us anything we should be doing if its claims are justified.

Joan Burton (Dublin West, Labour)
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In terms of the direction international tax affairs are going, the discrepancy between a 12.5% rate and a 2% to 6% rate for foreign banks, which I suspect are largely registered in the IFSC, is very large, and in his reply the Minister seemed to concede this. We deserve a more detailed response on what is actually causing this. I know timing can affect the difference between effective tax rates and rates per accounting profits, but what is it that these companies are doing that they are able to reduce their tax to 2% or 6%? Do they have some extraordinary level of capital or equipment investment which allows them make large capital write-downs?

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Thank you, Deputy.

Joan Burton (Dublin West, Labour)
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How can they be doing this in Ireland, given that they do not by and large, as far as I am aware, have a retail presence in Ireland? This is deserving of a very detailed explanation to the Dáil.

Michael Noonan (Limerick City, Fine Gael)
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I have not agreed at all that the arguments in the Oxfam paper are accurate. What I have said is I am inviting Oxfam to meet my officials so the details of its case can be discussed. For example, Mr. Seamus Coffey, the academic from UCC who is now chairman of the Irish Fiscal Advisory Council, carried out some work for the Department two years ago, effectively to establish if there was a differential between the standard 12.5% rate and the rate paid by companies. His technical paper found the effective tax rate paid by companies was somewhere between 10.3% and 10.7% against the nominal rate of 12.5%. This is the most recent academic research I have available to me. I am not agreeing with the Oxfam data but I know its source and some of it has been misinterpreted. Oxfam may have insights to bring to bear on this so my officials will meet it.