The IT sector has led to a massive increase in corporate tax

The corporate tax spike in 2020 was entirely due to a jump in profits in the information and communications sector, which includes large digital multinationals. according to Tax Strategy Group documents released before the budget.

The sector’s tax payments increased from €1.12 billion in 2019 to €2.88 billion in 2020, increasing the sector’s corporate tax share from 10% to 24% .

This more than accounted for the overall increase in corporate tax to 11.883 billion euros last year, from 10.887 billion euros in 2019, as the pandemic affected payments in some other sectors.

The data, included by officials in documents that outline options for the budget, further underlines Ireland’s reliance on a small number of large companies for the bulk of corporation tax payments. This trend has accelerated as SMEs have suffered more during the pandemic.

Manufacturing, including big pharma, was the other big tax payer, paying a total of 2.9 billion euros last year, in line with 2019. Foreign multinationals accounted for 82% of payments corporate tax in 2020, compared to 77% previously. percent in 2019.

OECD reform

Ireland’s growing reliance on multinational taxpayers comes as rules governing such companies are being discussed at the OECD, with Ireland among six of the 139 countries involved in the talks not to have signed draft agreement.

The Tax Strategy Papers cite Ireland’s ‘broad support’ for most of the deal – including the part that proposes a minimum tax rate – but reiterate reservations about the uncertainty caused by the pledge to introduce a minimum corporate tax rate of “at least 15 per cent”.

The outcome of the OECD’s work “has the potential to have a significant impact on Ireland’s fiscal, budgetary and industrial policy”, the newspapers say. The document repeats predictions that the OECD deal could cost Ireland up to €2 billion in lost revenue every year, but says it is impossible to update this figure given the wide range of factors that remain to be determined.

Along with the details of the minimum corporate tax rate, officials point out that the US Congress has yet to agree proposals on its own tax reform plan, which is supposed to align with the OECD process.

The document also reiterates Ireland’s categorical opposition to a European Commission proposal in a July 2020 action plan that tax measures could be adopted in certain circumstances by qualified majority rather than unanimity. . This could be vital in the EU’s reaction to the OECD plan.

digital games

Separately, the newspapers indicate that work on a tax credit for the digital games sector, proposed in the last budget, is continuing and suggest that ministers consider favorably the extension of the tax relief for start-up companies, which is due to expire at the end of this year.

With regard to Brexit, the newspapers say that the current practice of imposing 23% VAT on imports of used cars from Britain – which enter directly or via Northern Ireland – “is a temporary measure until a longer-term solution is agreed between the EU and the UK”.

It also says the impact of returning the franchise to airports – and possibly ports – for people traveling to Britain could have a bigger impact on domestic businesses as travel resumes after the pandemic.

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Luisa D. Fuller