News & Media

12.5% is minimum acceptable effective rate of corporation tax

2 September 2016

Statement by Joan Burton TD
Spokesperson on Finance, Public Expenditure and Reform, and the Arts
Notwithstanding the past three days of panicky kerfuffle in Government circles, it was always inevitable that the Apple state aid decision would be appealed, if only by Apple. And it would have been a daft state of affairs if Ireland was not party to that appeal, particularly when it is likely many other EU states will take part.

However, Independent Ministers can take no credit for recalling the Dáil to debate this issue if they continue to keep Opposition parties – and the general public – in the dark about the actual facts and reasoning set out in the Commission’s decision.

There is absolutely no kudos to be gained for arranging an early recall of the Dáil to debate a 150-page decision which the Government has read but which nobody else has seen.

It should not be impossible to remove commercially confidential information from the document and to publish it in good time for a properly informed debate to be held. Anything short of that is just window-dressing – a debate for the sake of debate – to suit the semi-detached posturing of the Independent Ministers.

Labour has made it clear that we believe all taxpayers, private citizens as well as multinationals, are entitled to reasonable predictability in the application of the tax code to their affairs. We are all of us entitled to plan our lives and our finances on reasonable assumptions about what the tax laws say and will continue to say.

But, whether you agree or disagree with her motives or conclusions, it is quite clear that the Competition Commissioner has widened the ambit of competition law in its application to tax – and she has also widened her own remit.

To the extent that any outcome to an appeal will return some degree of certainty to an area where confusion now reigns, it must be supported.

And it cannot be ignored that this ruling comes by way of an application of competition law from a Commission that has tried hard but so far failed to achieve a direct input into the rewriting of our tax laws – including the setting of our headline rates.

Labour has made it clear that we support the 12.5% corporation tax rate, as an attractive offering to foreign investors in a region on the geographic and economic periphery of Europe. This offering should be seen as a strategy adopted by a country still in catch-up mode, rather than as a long term instrument of policy.

But we firmly believe that 12.5% is not just a reasonable maximum corporation tax rate but is the minimum acceptable rate at which corporate profits should be taxed. With a marginal rate so low, there can be very little if any genuine argument for allowances or reliefs to reduce the effective rate even further.

In Government we put an end to the double-Irish and the allocation of profits to companies with no tax residence. The Apple case concerns a set of rules that no longer apply.

I have for a long time been calling for an independent standing commission on taxation, to review trends in our tax laws against agreed principles of tax justice, and to identify anomalies as they arise.

If instead we are to now have another once-off review, of corporation tax only, it should concentrate on the new systems and methods that are available to reduce a company’s effective rate below 12.5%.

In particular, the recent revelations about the misuse of s. 110 of the Taxes Consolidation Act and of our charities law by financial institutions, so as to reduce their taxable profits, should be an immediate priority.

But, before my Party supports any Dáil motion on this, we need to have debate and agreement on the terms of reference for the review and on the independent body which will carry it out. We will not support a pig in a poke.