Mick Wallace (Wexford, Independent)
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26. To ask the Minister for Finance his views on a recent research paper (details supplied) which argues that US subsidiaries in Ireland have an effective tax rate of 2.2%; and if he will make a statement on the matter. [8344/14]

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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30. To ask the Minister for Finance if he will address the growing controversy around Ireland's effective corporate tax rate following the recent academic paper suggesting a 2.2% effective rate here; and if he will make a statement on the matter. [8363/14]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 26 and 30 together.

The issue of effective tax rates has been the subject of a number of Parliamentary Questions and discussions at the Joint Committee on Finance and Public Expenditure and Reform over the past 12 months.

I think it's important to note at the outset that two separate issues are often confused in discussions on the effective rate of corporation tax. The first issue is the global rate of tax which is paid by multinational companies.  This is a 'blended' rate and takes into account the amount of tax charged across all of the countries that a company trades in and not just Ireland.

The extremely low effective rate figures quoted in the research paper referred to in the question are based on a flawed premise.  They are running together the profits earned by group companies in Ireland and in other jurisdictions and incorrectly suggesting that Irish tax does or should apply to both.

The figures are estimated by dividing the amount of Irish tax paid by a total profit figure that includes substantial profits made by companies that are not tax resident in Ireland. Ireland cannot tax profits that are properly attributable to other jurisdictions. 

The ability of some multinationals to lower their world-wide rate of tax using international structures reflects the global context in which Ireland and indeed all countries operate.    The best way to effectively address this issue is for countries to work together at the international level and the appropriate action is being considered in this regard by the OECD as part of their project on Base Erosion and Profit Shifting and Ireland is participating fully in this process. 

The second issue is the effective rate of tax applying in individual countries.  Clearly, the domestic rate of tax paid in Ireland is within the control of the Irish tax system and Ireland is responsible for the amount of Irish corporation tax that is charged here.  I want to re-emphasise that all companies operating in Ireland domestic businesses and multinationals - are chargeable to corporation tax at the 12.5% rate on the profits that are generated from their trading activities here. A higher 25% rate applies in respect of investment, rental and other non-trading profits, as well as certain petroleum, mining and land-dealing activities, and 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 and there is no single internationally agreed comparative measure for this.  There are however a range of independent studies that show the effective rate in Ireland as being very close to the main headline rate of 12.5%.  The European Commission's Taxation Trends in the EU 2013 indicates an effective corporation tax rate for Ireland of 14.4% per cent.  The Price Waterhouse Coopers / World Bank 2014 report shows an effective rate of 12.3% for Ireland.  I know that the assumptions being used in that latter study have been challenged and I am not claiming ownership of the figures but they are examples of the way that different methodologies can produce different results. In response to the growing interest in the subject, the Revenue Commissioners now publish an additional explanatory note with their annual Statistical Report.

The 2012 Revenue Statistical Report (which refers to 2011 data) indicates that aggregate net taxable profits, after taking account of various deductions, allowances, charges and reliefs, amounted to €40.1 billion while the total amount of corporation tax payable on these profits was €4.2 billion. This means that total corporation tax payable as a percentage of taxable profits was approximately 10.5 per cent for 2011. While this percentage is lower than the 12½ per cent rate, this can be attributed to the availability of certain reliefs such as double taxation relief and the R&D credit for example.

The issue of effective rates of corporate tax was discussed at length at Committee Stage of Finance No. 2 Bill 2013 last November.  In view of the significant confusion around the issue, it was agreed that my Department would prepare a report on the matter to be presented to the Oireachtas Finance Committee by the end of Quarter 1 this year. This report is currently being prepared and will likely be published upon completion.