A report published by the Public Accounts Committee (PAC) today has highlighted what it calls an "unacceptable level of risk" in relation to Corporation Tax receipts.
The PAC report on the Examination of matters in relation to Receipts from Corporation Tax arose from a review carried out by the Comptroller and Auditor General (C&AG) of the factors contributing to the "volatile and highly concentrated nature" of Corporation Tax receipts.
The report showed that 13 of the 100 companies with the highest taxable income had an effective tax rate of less than 1%.
They said it "reflected the use of significant tax credits and reliefs, in particular, double taxation relief and research and development tax credits".
It also found that three sectors of the economy account for around 70% of the total Corporation Tax receipts
* financial and insurance activities;
* manufacturing (including pharmaceutical manufacturing);
* information and communications.
In 2016, the report says, 37% of Corporation Tax receipts were paid by the top 10 taxpayers, while 70% of receipts were paid by the top 100 taxpayers.
The Department of Finance said: “Corporation Tax revenue has increased significantly in recent years and the ‘Top10’ payers contribute just under 40% of this tax, leaving this component of the public finances exposed to idiosyncratic shocks creating a concentration risk.”
Last year, Corporation Tax receipts were €8.2bn, i.e. 16% of total tax receipts of €50.8bn.
PAC Chairman, Seán Fleming, said: “The PAC received a considerable amount of briefing information from both the Department of Finance and the Office of the Revenue Commissioners. We also engaged an independent tax expert to support the work of the Committee during this process.”
"This report draws attention to the highly concentrated nature of Corporation Tax receipts.
Mr Fleming called on the Department of Finance to carry out a review of the Corporation Tax system to address the risks.
He said: “During the course of our hearings, we requested from Revenue a breakdown of the losses carried forward figures, but found that Revenue data is lacking in detail on the breakdown of losses carried forward by companies."
The PAC is urging Revenue to carry out an age analysis and put in place procedures to analyse losses carried forward in order to identify those relating to trading losses and those relating to unused capital allowances.
Mr Fleming said: “The Committee is also recommending that the Department of Finance should consider the introduction of a 10-year time limit or sunset clause and/or other restrictions in respect of losses carried forward.
"This measure would help to give greater priority to the sustainability of Corporation Tax receipts on an annual basis.
“We also requested accurate details on PAYE paid by participators in close companies. As Revenue could not provide this information either, the Committee is not satisfied that Revenue can demonstrate that the application of close company rules is achieving its intended purpose.”