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Effective Irish corp tax rate under 11pc

Monday, April 07 14:55:38

Ireland's effective corporate tax rate, the rate at which firms actually pay tax, stood at on average at between 10.7pc and 10.9pc, according to a Technical Paper from the Department of Finance today.

It concludes that the data from the CSO and Revenue Commissioners provide the best estimate of the effective rate of Corporation Tax on the total profits that are subject to Irish tax.

It shows that, since 2003, these have averaged 10.9pc and 10.7pc respectively.

The paper was commissioned by the Oireachtas Committee on Finance, Public Expenditure and Reform last November amid growing international and national pressure on Ireland's corporate tax regime.

The Department of Finance commissioned Seamus Coffey, Lecturer in Economics in University College Cork, to conduct the work jointly with Kate Levey, a tax-qualified Assistant Principal in the Fiscal Policy Division of the Department of Finance.

A company resident in Ireland is liable to Corporation Tax on its worldwide profits. Whether or not these profits are brought into Ireland is irrelevant. For Irish resident companies with foreign-source profits, double taxation relief is available for corporate income tax paid in other jurisdictions. A company that is not resident in Ireland for tax purposes but which has a taxable presence in Ireland will only be liable for Corporation Tax on its profits sourced in Ireland.

The 'effective' rate of tax is generally understood to mean the tax paid as a percentage of the profits of companies.

The taxable base in respect of corporate profits in Ireland is very broad as evidenced by the fact that the effective rates of tax shown under the two separate model company approaches are close to the statutory headline rate of 12.5pc, the Paper concluded.

The researchers used different methodologies to assess effective tax rates - one being the "model company" method produced for the European Commission in 2012, which showed an effective Irish tax rate of 14.4pc while a second methodology from the World Bank and PwC came up with a rate of 12.3pc. Neither takes account of tax incentives.

A second, far more complex approach is to look at the average corporate tax burden of the entire corporate sector in a country and this came up with a range of between 8.3pc and 10.9pc using two measure of "economic profit".

Using the Revenue Commissioners' approach and measure of "taxable porofit" came up with rates ranging between 10.7pc and 11.9pc.