Just 10 firms paid 50% of record Irish corporation tax in 2015
Irish corporation tax receipts jumped by almost 50% in 2015 and only 10 firms accounted for about 50% of receipts in the year — a windfall for the Exchequer resulted in a rise in receipts from €4.6bn in 2014 to €6.9bn in 2015. In 2014 Finfacts estimated that about 40 American firms accounted for two-thirds of Ireland's headline exports in 2013.
Last November we speculated here that Apple was among the top 10 rising contributors: Ireland: Apple's foreign tax rate rises to 6% from 2% in 2012
The rise to about 50% in CT receipts compared with Revenue statistics that the top 10 accounted for 24% of receipts in the period 2008-2012, and it illustrates the dependence of the economy on a small number of foreign firms, at a time when international tax rules are being changed.
The 2015 CT data are from the NTMA for the first ten months of the year, while November CT receipts from smaller firms may have slightly cut the share.
Irish export data is massively distorted but ministers, public agencies, and the Economic and Social Research Institute (ESRI) have often treated the distorted data as fact, as does the media.
Last August in a pre-budget letter to Michael Noonan, finance minister, Patrick Honohan, the governor of the Central Bank, warned:
All things considered, you will be alert to the danger of using windfall fiscal gains to justify long lasting spending commitments [ ] The interpretation of both GDP and GNP statistics as measures of economic performance is seriously complicated by the way in which the activities of multi-national corporations are measured, and a significant part of the recent growth in these production numbers can be attributed to these distorting features.
Today the Irish Times reports:
Irish businesses ramped up the value of goods exported to the EU by more than 40% last year, with Ireland now the fastest growing economy in the Eurozone. Against this backdrop, the Irish Exporters Association (IEA) is holding an export leadership forum in Dublin on Wednesday and Thursday, with more than 60 national and international speakers.
There are no data on the surge in exports and how much tax avoidance was a factor — take it on trust but it is likely that the 40% claim is very misleading. In 2014 Irish-owned firms had exports of €3.9bn to Northern Europe (ex UK) according to Enterprise Ireland.
Last September, the Irish Times reported:
Microsoft has replaced Google as the top exporter in Ireland, after growing its export turnover by 21% from €15bn in 2014 to €18.2bn this year.
Medtronic Ireland, the medical devices firm was in third place with export turnover of €16.7bn — Medtronic Inc. became Irish for tax purposes in 2015.
Microsoft Inc. had revenues of $93.6bn — Microsoft in Ireland with about 1,200 employees accounted for 21% of global revenues. The company had a payroll of 118,000 in 2015. Google booked 29% of its global revenues in Ireland in 2014 and Facebook booked 50%.
The Reality Check here is that absent foreign-owned exporting firms, Ireland export performance would be as poor as Greece's.
Don't expect it to be a general election issue.
The National Treasury Management Agency (NTMA) notes:
the export and investment figures are distorted to an extent by the practices of multinational companies, given recent investment in intellectual property and aircraft trade. When adjusting for these factors, investment accounts for around 40% of Ireland’s growth in 2015 while net exports accounts for 20%.
However, it's apparently taboo for the NTMA to acknowledge for example the impact of the Double Irish tax dodge on services (computer + business services categories) exports e.g. Microsoft, Google, Facebook etc.
David Purdue and Hansi Huang of NTMA Economics, in a note, Irish Exports: The facts, the fiction and the risks, published last month, cite the corporation tax data for 2015:
Exports are amongst the most concentrated in Europe with the top 10 goods products (out of 3,900) accounting for 45% of all goods exports. Services exports are also concentrated.
There are two main risks which arise from this concentration of exports. First, there is the risk that the multinational companies which contribute strongly to our export growth will relocate their business elsewhere. This risk can be mitigated in part by policy.
Second, idiosyncratic sector risk is a worry for Ireland. Even if multinational companies choose to remain in Ireland, our dependence on these companies opens Ireland up to sector/company shocks which are hard to mitigate with policy.
The note says that Computer Services have been the dominant sector in services with exports tripling from €15.7bn in 2005 to €47.9bn in 2015 — 22% of all exports — three times their contribution in 2000.
The fictions caused by tax avoidance such as the jump in the value of Computer Services, are not acknowledged, which debases the value of the note.
The NTMA estimates that goods exports in 2015 were valued at €140bn (including overseas 'contract manufacturing' to be included in data to be published in March) — €30bn is effectively fake and the so-called contract manufacturing relates to booking of overseas production as Irish exports; at least €35bn of the €50bn trade surplus in Chemicals + Medical Devices is related to profit-shifting while in services of about €120bn in 2015, some €60bn results from Double Irish tax avoidance — that is an estimated fake total of €125bn.
Contract manufacturing is a tax dodge where foreign production becomes an Irish export
There is a poor correlation between rising headline exports and jobs.
Estimates of jobs in tradeable exporting firms (Irish and foreign-owned) rose by 23,000 in the 15-year period 2000-2015 — from 356,000 to 379,000 — while the workforce grew by 20%.
Including transport and tourism, jobs in the exporting sector fell 30,000 in the period June 2008-Sept 2015.