Currently, firms operating in Ireland pay a corporate tax rate of 12.5% and through reliefs and allowances available, firms’ effective corporate tax rate can be much lower than the 12.5% headline rate.
Recently, it emerged a holding firm for medical device multinational, Boston Scientific, paid an effective corporate tax rate of 4% when it paid tax of $60m on revenues of $1.4bn in 2011. One Abbott Laboratories Irish subsidiary paid no tax on profits of $1.8bn in 2011 as it was not resident here for tax purposes.
Asked on his plans to introduce a minimum effective corporate tax rate by Labour TD Brendan Ryan, Mr Noonan responded: “Neither I, nor my department, would be in a position to introduce a minimum ‘effective rate’ in Ireland in the way suggested.”
Mr Noonan told the Dáil: “I am aware of recent reports that claim the rate of tax being paid by some companies operating in Ireland is lower than the headline rate of 12.5%. The tax rates quoted are, emphatically, not the rate of tax paid by such companies, or by any company, on their Irish activities.”
He added: “All companies resident in Ireland are chargeable to corporation tax at the 12.5% rate on the profits that are generated from their trading activities in Ireland.”
Mr Noonan pointed out: “A higher 25% rate applies in respect of investment, rental and other non-trading profits. Chargeable capital gains are taxable at the capital gains tax rate of 33%.”
He said: “There are different ways of measuring the effective rate of corporation tax depending on the variables that are used. As there is no such single internationally agreed methodology to calculate the effective rate of corporation tax, there is no reliable basis upon which to calculate the current ‘effective rate’ of corporate tax in Ireland without being potentially misleading.”
Mr Noonan referred to a 2013 report by the World Bank and PWC that put Ireland’s effective rate at 11% and a separate 2011 European Commission report that indicates Ireland has an effective corporate tax rate which is close or indeed higher than the statutory 12.5%.
He said: “My department does not take ownership of these reports, but they do indicate that the ‘effective’ rate of tax paid by companies in Ireland is close to the headline rate of 12.5%.”
Mr Noonan said: “Some other countries have a high headline rate of corporation tax which is then supplemented by a high number of tax reliefs which reduce the overall rate of tax paid.
“By contrast, the approach in Ireland is transparent: we have a competitive headline rate of corporation tax which is applied to a broad base.”