US firms fail to pay full Irish tax

US firms with an Irish presence have reportedly been paying less than the recommended 12.5% rate of corporation tax for overseas firms.

RTÉ reported yesterday that US companies paid an average tax rate of 8% on the profits generated by their Irish divisions in 2008, the most recent date for which such figures are available. The information was made available to RTÉ under the Freedom of Information Act and was based on an analysis of 304 company tax returns published in a recent US Congressional Budget Office report.

The report suggests that companies can end up paying below the 12.5% tax rate by claiming tax credits for a range of purposes, including R&D activity. According to RTÉ’s account, 2008 saw US companies with interests in Ireland pay the Revenue Commissioners a combined €1.29 billion, but repatriate some €16.1bn to the US.

Firms repatriating money to the US still have to pay tax in their homeland, but that final bill is adjusted to account for payments already made to the Revenue here.

The report seen by RTÉ also suggests that 5% of the total income of US firms who repatriate funds from here comes from their Irish operations.

The report doesn’t just look at US firms in Ireland, but those with divisions in 34 developed countries.

However, it found that Ireland has the lowest corporation tax rate and that the country was the fourth- largest source of repatriated income to the US in 2008.

While the document looks at a number of methods to ensure companies pay more tax — noting that US firms paying tax abroad have managed to reduce their income tax liability by around 40% — it stops short of classing Ireland as a tax haven, something which the OECD has already indirectly stated was not the case.

However, the RTÉ report suggests that the document refers to another report, by the US Government Accountability Office, which does rate Ireland as a tax haven.

The Congressional Budget Office report suggests US firms should either treat their overseas subsidiaries differently to their domestic divisions or stop deferring liabilities.