FIGURES given by the Comptroller & Auditor General (C&AG) Seamus McCarthy’s office to the Public Accounts Committee last week showed that eight out of the 100 companies with the highest taxable income had effective tax rates of zero, while some which had negative rates ended up getting tax rebates. Notwithstanding Revenue Commissioners chairman Niall Cody’s denial that Ireland is a tax haven, it is little wonder that US President Donald Trump is going after large American corporations to repatriate their profits back home.
Even though he is trying to take steps to reduce the US corporation tax rate from 35 to 20% with legislation before Congress, the Irish rate of 12.5% is still a lot more attractive for multi-national companies investing here. With Brexit looming, the British government is planning to lower its corporation tax rate to 17% by the end of this decade, but it is being urged to have a rethink in that regard given the way the economy there is suffering right now.
Then, of course, we have our remaining European Union colleagues who have been trying to get us to ‘harmonise’ our corporation tax with their higher rates, but so far the Irish government has resisted and, rightly, insisted that setting tax rates is its prerogative.
In August 2016, the European Commission ordered Apple to repay €13bn in unpaid taxes to Ireland even though, ironically, it seems the government here does not seem to want the money and has launched a legal challenge to the Commission’s ruling that Ireland’s tax arrangement with the multinational was in breach of State aid rules. In the meantime, a deal is about to the struck with Apple to hand over the €13bn next year to be kept in an escrow account pending the final ruling on the case.
A sum like this would do a lot to alleviate many of our housing and health service shortcomings, but the Irish government seems to be looking at the bigger picture of keeping the likes of Apple onside, given the foreign direct investment and employment they provide in this country. The €13bn in question is the equivalent of two years of total corporation tax receipts, however the multinational companies and their employees also contribute quite a significant amount to the Irish economy through income tax, PRSI, VAT and other taxes.
The most worrying thing about the corporation tax paid by multinationals is the narrowness of the tax base, as it was revealed by the C&AG that 37% of receipts comes from just 10 firms while 70% comes from the top 100. There are so many things that these companies can set against their corporation tax bills – one of the most useful being research and development (R&D) carried out in Ireland, which can have a potential longer-term benefit for us too.
It is annoying for PAYE workers in the ‘squeezed middle’ to see big multinational companies getting away with paying little or no corporation tax and most people would be happy if they were all seen to be paying an effective rate of 12.5% as opposed to zero or being given a rebate in some cases. However, the companies are operating within the laws of the land which are probably keeping them here and many would move on to another country if they could avail of a sweeter tax deal.
One advantage we have in Ireland – for US companies in particular – is that, quite soon perhaps, we will be the only English-speaking country left in the European Union when Britain leaves and this should prove quite attractive to them. A report by Revenue on Ireland’s corporation tax rules is expected to be ready by next April and maybe the big hitters could be pushed for a bit more tax money after that, but without scaring them away.