On the Corporation Tax (CT) side of the house, the PAC carried out an examination of CT receipts. This followed a C&AG review of factors contributing to the volatile and highly concentrated nature of CT receipts at a sectoral & national level in recent years.
Some details of the findings:
70% of CT profits are generated by just 3 sectors:
- financial & insurance,
- manufacturing (including pharmaceuticals) and
- information & communications.
Of the 2017 top 100 companies:
- 51 were US companies & paid €4.25bn in CT,
- less than 10 were UK companies & paid €128m,
- just over 10 were Irish companies & paid €370m,
- other countries in the top 100 accounted for a further €1.11bn.
In 2015, the average CT effective rate applying to all companies was 9.8%
The effective rate of CT by the top 100 taxpayers ranked by taxable income in 2015 was:
Effective rate
0% - 8 companies
0% - 1% - 5 companies
1% - 5% - 1 company
5% - 10%- 7 companies
10% - 12% - 14 companies
12% or more - 65 companies
The effective rate of less than 1% by 13 of the top 100 above reflected the use of significant tax credits and reliefs, in particular double taxation relief and research and development tax credits.
In the 5-year period to 2015 the annual cost of the R&D tax credit increased by 171% while the number of claimants increased by 46%.
The cost to the exchequer of the R&D credit increased from €261m in 2011 to a provisional €674m in 2016.
The Committee noted that reliefs such as R&D are not available to many indigenous companies, simply by virtue of the nature of their trade (retail, warehousing etc) and their small scale.
The committee also looked at the indefinite carry forward of losses. Updated provisional information provided by Revenue for 2016 showed the total losses carried forward to be €213.6 billion.
In its consideration of the tax arrangements for REIT’s the Committee noted a recent trend where an increasing proportion of Irish property assets are owned by non-residents. The Committee heard that there was concern that structures were available, to some property developers and those buying distressed loans, which could put the State at risk that the tax rights to property was leaking out of its tax base.
