Economist claims tax rate data flawed

The data used to support the claim that US multinationals operating in Ireland pay an effective tax rate of 2.2% is flawed, according to a leading economist.

In a research paper released by Trinity College Dublin academic Jim Stewart, data from the US Bureau of Economic Analysis was used to show that US multinationals paid an effective tax rate of 2.2% on the $144bn of net income earned in this country.

However, UCC economics lecturer Séamus Coffey argued that the $144bn figure is not correct.

“There is nothing close to $144bn of US multinational corporations profits in Ireland. Such massive profit figures do not appear in the statistics produced by either the CSO or the Revenue Commissioners. The gap between GDP and GNP is large, but it is not that large,” he said.

“For 2011, the Revenue Commissioners report that the gross profits of all companies in Ireland was €74bn. After capital allowances, losses carried forward, trade charges and other adjustments net taxable income was €40bn.”

He argued that the Bureau of Economic Analysis includes revenue from companies that are incorporated in Ireland but do not have any operations in this country. A case in point is the US multinational, Apple, which was the subject of US Senate hearings last June into the management of its tax affairs.

One of its companies that came under scrutiny was Apple Sales International, which had pre-tax earnings of $12bn in 2010. This company is incorporated in Ireland, but has no physical operations here.

However, using Bureau of Economic Analysis methodology, the $12bn would be included in the $144bn attributed to income earned in Ireland.

Moreover, companies incorporated by Google in Ireland used in a complex tax avoidance scheme known as the ‘double Irish’ also skew the Bureau of Economic Analysis figures.

“Much of it flows to small island nations like Bermuda and the Cayman Islands. Google books massive advertising sales revenues in Ireland, but the profit is attributed to intellectual property that is held in Bermuda.

The holding company, Google Ireland Holdings, is Irish incorporated but the royalty payments made to it are outflows in the Balance of Payments and the profit is not taxable in Ireland,” said Mr Coffey.

On RTE’s Morning Ireland yesterday, PwC tax partner, Feargal O’Rourke, said there was “a hole the size of the Grand Canyon” in Mr Stewart’s research paper and the conclusion.

© Irish Examiner Ltd. All rights reserved

More in this Section

N20 Cork to Limerick road upgrade an ‘immediate priority’

Investors should enjoy the calm before reality sets in

Macra president: Vital need to keep on top of market forces

Overseas buyers swoop for UK firms


Breaking Stories

Hands-on: Prisma and turning your photos into works of art

Gorilla Glass 5 hopes to end the days of cracked phone screens

Verizon set to boast one billion users with purchase of Yahoo

Nintendo's shares plunge after investors realise they don't make Pokemon Go

Lifestyle

Showbiz news: Miranda Kerr gets engaged to Snapchat founder

Ready to sticky rock and roll with the holiday treat that spans generations

New app helps tourists to get travel wise and avoid holiday disasters

Community action will help to slow down climate change

More From The Irish Examiner