Simon Harris (Wicklow, Fine Gael) | Oireachtas source

----- but the regime we have in this country is around our business responsiveness. Let us also remember the reputation we have in the delivery of excellence across a range of companies. We have talent, a track record and tax which is three Ts. Companies decide to locate here for lots of different reasons and while tax is an important one, it is only one reason.

There are many figures bandied about regarding the effective rate of corporation tax. Senator Reilly made reference to the United States BEA data but we do not accept this as valid in the Irish context because thee basic issue is that US data on the profits of subsidiaries of US companies are generally reported by reference to the place of incorporation of those subsidiaries, not by the place of tax residence of those subsidiaries. For that reason the US data often overstates the profit made in Ireland by subsidiaries of US companies because significant profits arise to Irish registered companies which are tax resident elsewhere. Therefore, I do not accept it is as clear cut as that.

There has been reporting on this. The Oireachtas finance sub-committee undertook quite a significant body of work on this topic. In April 2014 the Department of Finance published a technical paper on the effective rates of corporation tax in Ireland. The paper was jointly written by the Department of Finance and the well regarded economist, Professor Seamus Coffey of University College Cork, to ensure the work was as objective as possible. It was published in line with the budget around that time and contained a comprehensive analysis of the effective rates of corporation tax. It was prepared to provide clarity about the seemingly conflicting figures that are frequently quoted. It is fair to say that it is an objective and excellent resource for those who seek to understand this complex and technical issue.

Over the past few years there has been a great deal of discussion about the effective rate of corporation tax. Much of this discussion has been confusing and unclear because, as Senator O'Brien has said, there are many reasons for different rates. It is important to note that there is no single measure of effective corporate tax rates which can claim to be the best or the most accurate - different measures are relevant depending on the task at hand. The paper examined three different methodologies used in the calculation of effective rates of corporation tax generally. The paper also analysed eight different figures which are quoted in great detail regarding Ireland. Two of the rates often quoted are the EUROSTAT implicit tax rate of approximately 6% and the US Bureau of Economic Analysis, BEA, data of 2.2%. However, this paper by Mr. Coffey and the Department of Finance concluded that neither of these rates were adjudged to be the most appropriate rate of effective corporation tax. The EUROSTAT rate is based on national accounts which do not correspond to the actual or legal tax base in computing tax liabilities. This methodology can therefore skew the effective rate and I have already outlined the difficulties with using the BEA rate.

In attempting to assess the effective corporate tax rate applying to the total profits earned by companies in Ireland, the paper concluded that the approach based on the national aggregate statistics from the Revenue Commissioners and the Central Statistics Office is the most suitable. The paper found that the effective rates of corporation tax as measured according to statistics from these two sources are reasonably close to the headline rate of 12.5% and that the difference is mainly accounted for by double taxation relief and a small number of other reliefs, including the research and development tax credit.

The paper was based upon the analysis of effective rates across a ten-year period and therefore I do not believe there is a need to be re-examined it on an annual basis. It was only published in 2014. On the basis of this extensive analysis, we are comfortable that companies in Ireland are paying the appropriate rate of corporate tax on profits generated by those companies in Ireland. Given that a detailed report has previously been prepared by my Department and discussed at length by the Oireachtas finance committee, I do not believe there is a need to allocate scarce resources to conducting another report at this time.

With regard to the important issue of corporation tax raised by Senator O'Brien, he is correct that it needs to be monitored closely. After all that this State has been through it is important that we continue to very carefully monitor very the Exchequer figures, where tax is rising and where revenues are ahead of profile. The performance of corporation tax receipts has been unexpectedly strong in 2015. At the end of November, corporation tax receipts were €2.3 billion, or just under 60% higher than expected, at €6.4 billion, and up €2.2 billion, or 52% in year-on-year terms.

As the House may be aware corporation tax is highly concentrated in Ireland with approximately 80% of receipts received from the multinational sector. In addition, the top ten tax paying groups accounted for over one third of total corporation tax receipts. Revenue has advised that approximately 60% of the surplus against profile is from a small number of large multinational companies, hence the importance of continuing to attract multinationals and, importantly, it is primarily attributable to improving trading conditions. For example, at the end of October 2015 there was an increase of over 20% in the number of companies paying between €100,000 and €5 million compared with the same period last year. This was reflected in the receipts which are also up by over 20% for this cohort of companies.

Based on the information collected by the Revenue Commissioners, it would appear the vast majority, with the exception of around €300 million, of the increase in corporation tax payments are not one-off - they are not windfall taxes. They will enter the Revenue tax base for 2016 and beyond. Importantly, the chairman of the Revenue Commissioners wrote this letter on 20 November to the Minister of Finance which the Minister published on the Department of Finance website outlining that about €300 million might be exceptional payments but the remainder is expected to be part of our tax base for 2016 and beyond.

I will conclude by saying that while corporation tax receipts are running significantly ahead of profile, it is also important to note that VAT is ahead of profile with almost €1 billion extra collected this year than last year which can only be due to people spending more money in the real economy. Income tax is ahead of profile also. There are a number of areas ahead of profile. That is the rationale behind the corporation tax.