Revenue: Rising profitability explains tax surge

Sixteen thousand firms across the country which didn’t pay any corporation tax in 2014 paid €470m in corporation tax last year.

Revenue: Rising profitability explains tax surge

New analysis shows the main factor driving the increased tax receipts during 2015 is likely to have been “increased profitability”, according to Revenue Commissioners chairman Niall Cody.

Last year, net corporation tax receipts of €6.87bn were 49% ahead of receipts received in 2014 and 50% ahead of forecast.

Last November, Revenue provided an initial analysis of the increase in corporation tax to Finance Minister Michael Noonan.

In a subsequent letter dated April 26, 2016, Mr Cody explained: “Corporation tax receipts of €6.87bn in tax year 2015 are €2.2bn above 2014 receipts.

"The increase is explained by a number of factors: balances associated with earlier accounting periods in 2015 are more than €400m higher than balances for earlier periods for 2014.

“Approximately €470m in payments are received from roughly 16,000 companies that did not pay corporation tax in 2014.”

In the letter released under the Freedom of Information Act, Mr Cody told Minister Noonan: “Companies that paid corporation tax in 2014 paid more than €1.8bn additional corporation tax in 2015 — over €400m of which is in respect of balances associated with earlier accounting periods.

“Of this €1.8bn — approximately 78% or €1.4bn is received from payments made by foreign-owned multi-national corporations, with the remaining €400m being paid by indigenous firms. The level of repayments made in 2015 is proportionally lower than in 2014.

“While corporation tax is concentrated among payments by large multi-national companies, the analysis shows that the growth in receipts in 2015 is broad based in nature and not solely arising from foreign owned multi-nationals.

“Payments from indigenous companies, while lower in monetary terms, are growing at similar rates. Overall, more companies paid tax in 2015 and their average payments were higher.”

Mr Cody went on to point out that while the recovery in tax receipts is broad-based in nature, some payments made in 2015 were once-off and not expected to re-occur.

Mr Cody explained that while effective rates have remained steady over the past number of years at 10.1%, this had dropped to 9.7% in 2014 as a result of “increased R&D creditors and film relief”.

Last year, the improved performance of the some of the country’s banks helped tax receipts with AIB paying €534m in corporation tax and Bank of Ireland paying €285m.

Other companies to feature in the top 10 include CRH which paid €304m, Ryanair which paid €115m and Microsoft which paid €113m.

Fianna Fail finance spokesman, Michael McGrath said yesterday: “The correspondence between Revenue and the Department of Finance indicate that while international companies based in Ireland have enjoyed very benign trading conditions, Ireland is undoubtedly vulnerable to a change in external factors.

“It is vital that we do not build up permanent spending or tax commitments based on potentially temporary revenues.

“The establishment of a Rainy Day fund should be a priority in terms of cushioning the effect of the economic cycle.”

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