Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

In simple English, it means that in respect of a company that was in profit last year, paid corporation tax on it and is now expecting to have a loss this year, there is provision that it can carry losses forward from one year against its profit next year because business does not operate on a 12-monthly cycle. The business cycle can run for a period of years. In some years businesses can have losses; in others they can have a profit. The taxation system in every country allows a business, not individuals, to do that. If a business through corporation tax has a loss this year it can carry that loss forward against its profit next year to reduce next year's tax bill. This measure is proposing the opposite and I believe it is quite novel. We are now saying that if a business had profits last year on which it paid corporation tax but now, as a result of Covid-19, it expects to have a loss this year, which will be the case, it can offset the losses it expects to have this year against the corporation tax it paid on last year's profit and get a benefit of cashflow by getting a refund from the Revenue in respect of the tax it paid last year. It is absolutely novel and a clever piece of work.

It is another mechanism for the Revenue Commissioners to give money to companies that expect to make a loss this year, notwithstanding that they were previously profitable. It is a great way of getting the system in, so to speak. We are restricting it to 50% because at this stage companies would not be able to accurately predict what their profits will be at the end of the year. If they have a loss when they come to do their returns next year for the end of this year, they can balance it up. They might have had a bigger loss and they will get the benefit but we are saying that, as an interim measure, if they expect to have losses they will be able to recoup some of the taxes they paid last year. It is a novel way to get the benefit of previously-paid tax against an expected loss, and that is the reason it is restricted to 50%.

On the issue of losses forward in the economy in general, we are into billions of euro. I might have said the previous day that if the Senator wants a report on this topic I direct her to the Committee of Public Accounts in the previous Dáil, which I chaired. I wrote a specific chapter on this and I was totally sympathetic to this issue. I am speaking personally and not as Minister of State in the Department. I am referring to what I said in the previous Oireachtas committee. We believed that sometimes there should be a sunset clause. Losses cannot continue to be brought forward from ten or 15 years ago against future profit. Those restrictions have been introduced in other EU countries, including our nearest neighbour, which has a sunset clause in respect of the number of previous years' losses companies can bring forward against future profits. In having this measure we are not in strange territory.

We have never gone down that road in Ireland and wearing my hat as Minister of State in the Department of Finance I am not suggesting we go down that road. The Department did a report on that issue some time ago. It would take quite a bit of work because, to get technical for a moment, companies can write off the cost of assets or capital expenditure against their profits and that can lead to a loss forward for tax purposes. Some companies have a genuine trading loss, which can lead to losses forward against future profits, but the Revenue system does not distinguish between the two because it has not been asked to do so previously. It would probably take legislation to require the Revenue to do that. The Revenue cannot do it of its own volition because there would not be a statutory basis on which it could seek that information from taxpayers. It would require a change to legislation and for the Revenue to then seek that information from taxpayers from the next year on. We would then have a more detailed and accurate assessment of what is out there than we have currently but I am holding the fort on this one, as Minister of State in the Department of Finance.

I understand the point the Senator makes. The chapter on that particular issue was signed up to by all members of the previous Committee of Public Accounts but for the purpose of this legislation this is a reversal of what we normally look for in that we are actually giving people back money against the tax they paid last year to be brought forward. It is a refund in respect of expected losses this year. It is ingenious. It is a way of getting cash from the Revenue Commissioners into businesses that expect to lose money this year. I could not commend that aspect of this legislation highly enough. I understand what the Senator is saying. I cannot give a commitment on behalf of the Department or the Minister but I suggest she keep at it because as time goes by other people might take up the point. It is a valid point but it is not part of this legislation.