Ireland gets 5 times the rate of Corporation Tax per head as France or Germany

The remarks were made in response to new figures showing the State’s unusually high level of tax revenues from corporations compared to the size of the population, which were laid out in the Global Tax Evasion Report 2024 by Paris School of Economics research body the European Union (EU) Tax Observatory.

The report showed that Ireland earns €4,500 in corporation tax revenue per capita, which is five times the rate of France or Germany and has multiplied five-fold since 2014.

....

The report said that Ireland and the Netherlands are “the biggest profit shifting destinations” and that over $140 billion (€130 billiuon) was “shifted to each in recent years”.

Ireland and the Netherlands had each accounted for about 15 per cent of profits shifted in 2019, according to the study.

The report stated that multinational corporations were taking advantage of low rates for royalties that are derived from licensing intellectual property, pointing to an Irish tax rate for royalties of 6.25 per cent since the introduction of a patent box regime in 2015.

Brendan Burgess said:

Global Tax Evasion Report 2024

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All credibility lost there.

More than a whiff of sour grapes to all of that. When you speak with people from the companies, it’s not our 12.5% or 15% rates of tax that are the be-all or end-all. It’s a load of factors…English speaking, education, common law rather than civil law, EU membership, stable, US pre-clearance at the airport, the volume of US flights, a decent place to live for the employees, a wide tax treaty network.

Contains all sorts of dubious claims:

For example, if a company has sufficient capital in Ireland, employs sufficiently many workers there, and Ireland offers effective tax rates of 6%, then the firm may remain taxed at 6% in Ireland.

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There is no lower 6% tax rate in Ireland which depends on the number of workers in Ireland nor capital invested in the Irish entity.

Figure 2.6 shows that the corporate tax revenues of Ireland have exploded since 2015. In 2022, despite its low rates, Ireland collected the equivalent of €4,500 in corporate income tax revenue per inhabitant, nearly five times as much as France or Germany that have much higher corporate tax rates (and nearly five times as much as in 2014, adjusted for inflation). Some of this growth may reflect the relocation of real activities to Ireland, i.e., standard tax competition for capital. But a large fraction probably reflects the rise of profit shifting to Ireland, in particular due to the relocation of intangible assets following BEPS, the Tax Cuts and Jobs Act, and the introduction of the 6.25% tax rate. Whatever the reason, this increase illustrates how absent tax coordination and minimum taxation, tax havens can generate high amounts of tax revenues by choosing very low tax rates67.

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This is self-contradictory. BEPS is a global tax coordination project designed to reduce base erosion and profit shifting. In contrast the Tax Cuts and Jobs Act was a sovereign decision by the US to collect less tax. How is this the responsibility of any other jurisdiction?

They offer preferential taxation of worldwide income or of foreign income while applying standard taxation to income earned domestically. This type exists in Greece, France, Ireland, Italy, Luxembourg, Malta, Portugal, Spain, Switzerland75, and the UK

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I'm not aware of any such taxation rate for Ireland. There is the 25% rate on non-trading income but corporate income from trading activity is taxed the same in Ireland no matter what its source.

. Regimes which apply to income earned while performing a specific economic activity in the host country: These regimes offer tax reductions on the income earned domestically. Most of them target high-income workers or specific professions such as scientists, artists, or athletes. This type exists in Austria, Belgium, Cyprus, Denmark, Finland, France, Ireland, Italy, Luxembourg, the Netherlands, Sweden.

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In Ireland there is a preferential regime for artists and former athletes but this is an absolute drop in the ocean.

The report also claims that the remittance basis for non-taxation of certain income benefits 70,000 Irish-resident taxpayers and has a fiscal cost of €600m per year. Both estimates seem incredibly large and even Revenue don't produce estimates of how many benefit or what the cost is.

T McGibney said:

All credibility lost there.

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Fully agree. This is tax avoidance, not tax evasion.

Dr Strangelove said:

There is the 25% rate on non-trading income but corporate income from trading activity is taxed the same in Ireland no matter what its source.

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Just to support your excellent points above, the 25% CT rate also applies to overseas trading income earned by an Irish resident company. This means that it's unprofitable for someone to set up an Irish company as a vehicle for trading in another jurisdiction.

These EU- and international State-funded tax reports are almost always heavily prejudiced in terms of ideology.

T McGibney said:

always heavily prejudiced in terms of ideology.

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I don’t mind the ideology. Piketty wants to live in 1950s France with little trade or capital flows, and lots of tax on businesses. We differ on this.

What I do mind is totally made-up facts!

Can anybody locate a report a few years ago that highlighted that the effective CT rate in France was c.6% because of the heap of deductions they allow for CT purposes, Headline rates are totally misleading.

WizardDr said:

Can anybody locate a report a few years ago that highlighted that the effective CT rate in France was c.6% because of the heap of deductions they allow for CT purposes, Headline rates are totally misleading.

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It was a PWC report from around 2012-2013. I can't find the detail though.

Hi lads,

Well one deduction was for Research and Development;
Other one was for setting up in a deprived area;
And of course there is Higher Depreciation allowance;
As well as New Start ups;

....Yet another was for hiring French nationals, I believe...

The truth is MNC's only pay the level of CT they are willing to, nothing more.

Best,

Opus 2018

Dr Strangelove said:

Contains all sorts of dubious claims:


There is no lower 6% tax rate in Ireland which depends on the number of workers in Ireland nor capital invested in the Irish entity.



This is self-contradictory. BEPS is a global tax coordination project designed to reduce base erosion and profit shifting. In contrast the Tax Cuts and Jobs Act was a sovereign decision by the US to collect less tax. How is this the responsibility of any other jurisdiction?



I'm not aware of any such taxation rate for Ireland. There is the 25% rate on non-trading income but corporate income from trading activity is taxed the same in Ireland no matter what its source.


In Ireland there is a preferential regime for artists and former athletes but this is an absolute drop in the ocean.

The report also claims that the remittance basis for non-taxation of certain income benefits 70,000 Irish-resident taxpayers and has a fiscal cost of €600m per year. Both estimates seem incredibly large and even Revenue don't produce estimates of how many benefit or what the cost is.



Fully agree. This is tax avoidance, not tax evasion.

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Ireland also has the Special Assignee Relief Programme (SARP). No idea if this type of scheme is commonplace in comparable jurisdictions.

SARP isn't that great internationally. And there are other comparable schemes out there. Other countries offer sweeteners in the way Ireland doesn't. One partic country offers a rebate of 300% of salaries paid to employees as an example. Another hands out family-visas like confetti to MNCs relocating departments across continents. (In that partic case, employees erupted when they discovered the new host country operated a payroll WHT (equivalent to our PAYE system) and charged income tax on earnings! )

If you are Irish, of course you are going to be delighted with our corporate tax haul and say it's sour grapes on the part of the French etc.

However, it truth, Ireland is playing a very dirty game, and sooner or later we will get backed into a corner over it.

In the meantime, I just wish we would use the money to deliver the much-needed capital and infrastructure projects we so desperately need.

We seem to have so little to show for it.

Calico said:

However, it truth, Ireland is playing a very dirty game,

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Please explain.

Sophrosyne said:

Please explain.

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We are enabling companies to shift profits made in another jurisdiction to Ireland and creaming off the top for ourselves.

And we are doing it on a huge scale.

If it was being done to us we'd be jumping up and down over it.

Multi-nationals can and do shift profits anywhere they like it is not confined to Ireland and it is not illegal.

Calico said:

We are enabling companies to shift profits made in another jurisdiction to Ireland and creaming off the top for ourselves.

And we are doing it on a huge scale.

If it was being done to us we'd be jumping up and down over it.

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There are features of the US corporate tax code that allow this.

According to this, the main countries shifting profits are:
US
Japan
India
Algeria
France
South Africa, and
China

The main recipient countries are:
British Virgin Islands
Bermuda
Singapore
Switzerland
Ireland
Great Britain
United Arab Emirates, and
Hong Kong.

There are other shifter and recipient countries.

It is the tax laws of the “shifter” countries that require public attention.

Sophrosyne said:

According to this, the main countries shifting profits are:
US
Japan
India
Algeria
France
South Africa, and
China

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well most of those countries are huge economic powers with the exception of Algeria and South Africa, therefore they are bound to have global corporations which we know they do have. its fairly obvious then that these corporations will have profits shared across their global operations. There is nothing shifty about this since they are very large economies. The only thing shifty is the presence of Algeria and South Africa , these countries don't have global corporations so what are they doing to shift so much money?

That is not really the issue.

It is the ability to shift profits (usually IP) to a lower tax jurisdiction.

Ireland’s CT tax rate is what it is.

MNEs can shift profits to another tax jurisdiction to avail of more favourable CT rates.

Why do so-called economists make that Ireland’s fault rather than the jurisdiction of the MNE that sanctioned the profit shifting in the first place?

Ireland has been a huge beneficiary of the rise of intangible assets.......I'm proud of our little country for being in the right place at the right time with the right policies to take advantage of it.....like lots of things in life I think Ireland's corporate tax windfall is a mixture of luck and skill.

We are like a Gulf State that struck oil in the 1990's when the digital economy began to take off in the US and Ireland was just a no brainer for a US group to setup some computers and sell to 500m people from one corporate entity.

It is our right to make hay while the sun shines but to do so within the rules of the game - OECD, BEPS, EU state aids.....which we broadly we do.

The more interesting question and the one raised by the recent OECD BEPS process (where the ball, this time, basically broke in our favor.)....is the sustainability of that business model.......like any company making unusual profits......Ireland's unusual corporate tax success will attract competitors and those intent on taking it away.

The energy and coordination required to get OECD BEPS to where it is today feels like the current status quo will exist at an international level for the next decade. My next concern would be our 'friends' in Europe using the EU level bureaucracy to make moves against us.

What's clear - is that Irish policy makers, like the gulf states, need to be thinking about what the world looks like in a post oil/post corporate tax banzana and how we prepare for that world.

The obvious answer is that we need to do a better job leveraging the MNC base to build genuine domestic champions.....Enterprise Ireland success stories....that one day might spawn an Irish company that could be part of the FANG's.

Its a classic innovators dilemma stuff.....to do so.....IMO......you'd need to disadvantage the MNC's relative to your domestic enterprises to make them MORE attractive places to work than Google/MS/META......in effect harming your existing business model to evolve to a future one. Whats clear from all the domestic companies I speak too is that competing for tech talent in the shadow of Google, META etc. comp packages and stock options is a difficult task.

Our corporate tax windfall comes at a price....I dont think one should assume its forever...and the price we pay is domestic enterprise ecosystem that fights with its hands tied behind its back.....cause our best and brightest are dedicated to the build out of a domestic enterprise ecosystem of another country (the USA)