A chara, – Arthur Beesley (Business, May 23rd) wrote that Ireland’s rate of corporation tax was reduced from 38 per cent to 12.5 per cent in 2003. This is incorrect.
Prior to 2003, the rate of corporation tax on profits from manufacturing and international (ie export) services – which covers most activity of foreign firms operating in Ireland – was just 10 per cent. The 38 per cent rate applied to all other corporate activity, and related to non-manufacturing activity within the Irish economy (mainly conducted by Irish businesses).
Following a finding by the EU that this distinction was discriminatory, a standard corporation tax rate of 12.5 per cent, applicable to all corporate activity in Ireland, was introduced in 2003. Thus, what was, in effect, the tax rate applying to foreign companies was increased in order to compensate the government for the tax lost through the reduction of the tax rate on domestic non-manufacturing activity.
As it happens, the “headline” rate of 12.5 per cent is of little relevance as far as the foreign corporate sector is concerned, as the average rate of tax paid by this sector is nowhere near this level. – Is mise,
Dr PROINNSIAS
BREATHNACH,
Department of Geography,
National University of
Ireland Maynooth,
Co Kildare.