The Department of Finance has not considered a “sunset clause” that would put a time limit on companies using €218 billion in historical losses from the economic crash to avoid paying taxes on future profits.
The potential use of crisis-era losses was raised with officials from the Revenue Commissioners and the Department of Finance as they appeared before the Dáil Public Accounts Committee to discuss concerns around the concentration of corporation taxes collected from a small number of large companies.
Figures provided by Revenue to the committee showed that Irish companies carried forward losses of €218 billion, though €40 billion of that was unlikely to be used as those losses sat in liquidated companies or businesses that were unable to use them against future taxes.
“I am staggered by the scale of that. It is probably no news to some of yourselves but I think it is a phenomenal figure,” the committee’s chairman Fianna Fáil TD Sean Fleming told the officials.
The bulk of the losses, €124 billion, were held by financial and insurance firms reflecting the heavy impact of the crisis on those sectors. The companies include AIB, the majority State-owned bank that told an Oireachtas committee last year it would not have to pay tax on profits for 20 years because of crisis-era losses.
Ronan Hession, head of business tax at the department, acknowledged it was “an enormous amount” but said companies were starting to “work through losses and starting to pay corporation taxes”.
“To some extent the hangover from the financial crisis and from the economic crisis is starting to work its way out of the system but we haven’t looked at a sunset clause,” he said.
Imposing a time limit on the use of these tax reductions was a “valid debating point for legislators”, he said.
Possible limits
Revenue chairman Niall Cody said that the UK set curbs on the amount companies could write off in taxes against profits, answering Mr Fleming’s question about whether other countries had introduced limits.
Comptroller and Auditor General Seamus McCarthy pointed out that restrictions on the use of losses were imposed on banks selling loans to the National Asset Management Agency, showing that limits could be set here.
The committee was told that Apple would start paying up to €13 billion in back taxes into an escrow, or holding, account over the next two months following the EU Commission’s ruling that the California-based company received favourable and illegal state aid support from the Government.
John Hogan, an assistant secretary at the department, told Fianna Fáil TD Marc McSharry that establishing the account had so far cost the State €2.5 million.
No other countries had made a claim on the €13 billion, he said.
Mr Cody said Revenue’s 10-year look-back audit of Apple’s taxes was 95 per cent complete and that it would be sending final calculations to the commission by the end of April.
Asked whether it would be close to the commission’s €13 billion figure, he said: “It would be in that ballpark.”
The committee heard that a custodian would be appointed very shortly to manage the Apple cash.
