Brendan Ryan (Dublin North, Labour)
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190. To ask the Minister for Finance in view of the fact that most corporations pay much less than the headline 12.5% corporation tax rate, his plans to introduce a minimum effective corporation tax rate; and if he will make a statement on the matter. [39474/13]

Seán Kyne (Galway West, Fine Gael)
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222. To ask the Minister for Finance the average effective rate of Ireland's corporation tax and the position of his Department on mechanisms being used to reduce the effective rate of corporation tax paid from the headline figure of 12.5%. [39798/13]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 190 and 222 together.

I am aware of recent reports that claim that the rate of tax being paid by some companies operating in Ireland is lower than the headline rate of 12.5%. The tax rates that are being quoted are, emphatically, not the rate of tax paid by such companies, or by any company, on their Irish activities.

All companies resident in Ireland are chargeable to corporation tax at the 12.5% rate on the profits that are generated from their trading activities in Ireland. A higher 25% rate applies in respect of investment, rental and other non-trading profits. Chargeable capital gains are taxable at the capital gains tax rate of 33%.

There are different ways of measuring the effective rate of corporation tax depending on the variables that are used. As there is no such single internationally agreed methodology to calculate the effective rate of corporation tax, there is no reliable basis upon which to calculate the current 'effective rate' of corporate tax in Ireland without being potentially misleading.

Therefore, neither I, nor my Department, would be in a position to introduce a minimum 'effective rate' in Ireland in the way the Deputy has suggested.

To illustrate the debate on the topic, I have previously referred to an estimate from a report produced by the World Bank and PricewaterhouseCoopers which put the effective rate in Ireland at 11.9% (Paying Taxes, 2013). I also referred to a study by the European Commission (Taxation Trends in the EU 2011), which indicates Ireland has an effective corporate tax rate which is close to or indeed higher than the statutory 12.5% rate (this is likely because of the 25% rate that applies generally to non-trading income).

I have been clear that my Department does not take ownership of these reports, but they do indicate that the 'effective' rate of tax paid by companies in Ireland is close to the headline rate of 12.5%.

Some other countries have a high headline rate of corporation tax which is then supplemented by a high number of tax reliefs which reduce the overall rate of tax paid. By contrast, the approach in Ireland is transparent: we have a competitive headline rate of corporation tax which is applied to a broad base.

We therefore have only a small number of tax incentives in Ireland, and we make sure that those we do have are specifically targeted. They are focussed firstly, on the creation of additional employment as is consistent with current Government policy, and secondly on areas of innovation with a view to generating high value-added economic activity in the country. The small number of reliefs we have include, for example, the R&D Tax Credit and the 3-year exemption from corporation tax for start-up companies.