Written answers

Thursday, 3 October 2013

Department of Finance

Corporate Tax Regime Issues

Photo of John HalliganJohn Halligan (Waterford, Independent)
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39. To ask the Minister for Finance if he will introduce measures in budget 2014 to increase the tax contribution of highly profitable corporations through the introduction of a minimum effective corporation tax rate by closing off loopholes which facilitate aggressive tax avoidance by some corporations; and if he will make a statement on the matter. [41474/13]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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In a number of answers to previous Parliamentary Questions on this issue I have repeatedly advised that there is no agreed international methodology for calculating the ‘effective rate’ of corporation tax. With that in mind, I am unsure as to the premise of the Deputy's question which seems to imply that Ireland has an "effective rate" that is significantly lower than our 12.5% rate. 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%.

I am aware of media reports which refer to the ways that some multinational companies structure their international tax affairs to minimise their tax costs and I understand that some of these reports have suggested that some companies in multinational groups pay Irish corporation tax at rates that are lower than 12.5%. At this point it is important to state clearly that such companies are not paying a low rate of Irish tax – as already stated all companies in Ireland pay the standard 12.5% rate on their profits which are generated in Ireland. The reports concerned appear to have incorrectly attributed to Ireland profits that represent the return due to assets in other jurisdictions, owned by group companies that are not resident in Ireland.

The profits charged in Ireland fully reflect the functions, assets and risks located here by a multinational group. The payments to the non-resident company represent the required remuneration of intellectual property assets funded and owned outside the State and its tax payments are properly reduced in these circumstances by reference to expenditure incurred for the purpose of its trade. Ireland cannot expect to receive or retain the remuneration of these assets.

The ability of multinational entities to lower their world-wide rates of tax using international structures reflects the global context in which Ireland and indeed all countries operate. Differences arise in the legal and tax systems between countries. International tax-planning takes account of these differences in national systems and rules. The most effective way to deal with such arrangements is for countries to work together to examine these structures and to consider how international rules can be amended to ensure fair levels of taxation. In this regard, Ireland is participating in projects at EU and OECD level which aim to address these issues.

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