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FactCheck: How much do multinationals actually contribute in taxes?

FactCheck looks into a set a claims made over the airwaves and in the Dáil in the past week.

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AMID THE FALLOUT from last week’s European Commission ruling that Ireland must recover €13 billion in back taxes from Apple, the debate has widened to the role of multinational companies as a whole, in our economy.

On Sunday’s Marian Finucane show on RTE Radio One, tax lawyer and commentator Suzanne Kelly claimed that multinational companies in Ireland pay 80% of corporation tax, 50% of PAYE and VAT, and 92% of customs and excise.

And during Wednesday’s Dáil debate, Fianna Fáil TD Jim O’Callaghan echoed the first two of these claims.

Several readers got in touch to ask about this, including Mike in Ballinteer in South Dublin, and Joe Kennedy in Cork, so we checked it out.

(Remember, if you hear big claims over the airwaves, email factcheck@thejournal.ie or tweet @TJ_FactCheck).

We’re going to assess each claim individually.

What was said:

You can listen to Kelly’s claims in full here and read Jim O’Callaghan’s comments here.

But since the original requests we got from readers related specifically to Suzanne Kelly’s comments on Marian Finucane, this is the statement we’re focusing on.

In response to a listener who had accused “Apple and their likes” of paying “peanuts” in tax, Kelly said:

80% of corporation tax is paid by the multinationals. 50% of PAYE is paid for by the multinationals. 50% of VAT is paid for by the multinationals. And 92% of customs and excise is paid for by the multinationals.

Claim 1: Multinational companies pay 80% of corporation tax in Ireland
Verdict: TRUE

The Facts

File Photo The European Commission has concluded that Ireland granted undue tax benefits of up to 13bn to Apple. The Revenue Commissioners is to collect the additional tax deemed to be owed by Apple and the money will be managed by the National Treasury M Source: RollingNews.ie

In response to FactCheck’s request for evidence on all claims, Suzanne Kelly directed us to this October 2014 report by the Statistics and Economic Research Branch of Revenue.

On page seven, the report states that from 2008 to 2012, 80.58% of all corporation tax was paid by companies assigned to the “large cases division” (LCD).

These are big companies and high net-worth individuals which exceed certain turnover and tax thresholds, but they are not exclusively foreign-owned multinationals.

Some MNCs are not LCDs, and some LCDs are not MNCs.

However, the same report states that multinational companies (MNCs) “match fairly closely” with companies in the large cases division, so there is considerable overlap.

And the report also states that from 2008-2012, MNCs were estimated to have paid more than 75% of all corporation tax (over €15 billion out of €20.5 billion), and in 2012 specifically, they paid more than 79% (€3.4 billion out of €4.3 billion).

In a subsequent report on the tax take in 2015, the Statistics and Economic Research Branch stated that “Foreign owned multinational companies account for around 80% of corporation tax receipts…”

Since net corporation tax receipts amounted to €6.873 billion in 2015, this suggests foreign-owned MNCs paid €5.498 billion in corporation tax last year.

The same report found that LCDs paid 77% of corporation tax. With MNCs paying “around 80%”, this further supports the high level of overlap between the two categories.

Unfortunately, the report doesn’t give raw numbers for corporation tax paid by MNCs specifically, and Revenue was unable to provide them, but the evidence available is enough to warrant a verdict of TRUE.

Claim 2: Multinationals account for 50% of PAYE
Verdict: UNPROVEN

The Facts

Irish budget 2016 Source: Niall Carson

The first thing to note here is that PAYE is an income tax deducted at source from the wages of workers. So it is not multinational companies who “pay” PAYE, it is their employees.

But this is well understood, and it’s clear that claiming MNCs “pay for” 50% of PAYE is shorthand for “50% of PAYE is accounted for by employees of MNCs”, or “MNCs account for 50% of PAYE”.

Unfortunately, while Revenue was able to estimate the percentage of corporation tax paid by MNCs in 2015, it somewhat surprisingly does not systematically track various tax takes from MNCs in Ireland.

Neither report mentioned above gives amounts or percentages of PAYE accounted for by MNCs specifically, and Revenue was unable to provide FactCheck that information.

However, the October 2014 report does state that: “large cases division companies account for 56% of PAYE”.

As we’ve already seen, large case division companies are not exclusively made up of foreign-owned MNCs, but as we have also seen, there is very significant overlap between the two groups in terms of corporation tax take.

So whatever PAYE is accounted for by LCDs, it is likely that the amount accounted for by MNCs is very similar.

However, we cannot make that assumption, and without proper figures from Revenue, the evidence available to us at this time only supports a verdict of UNPROVEN.

Claim: Multinationals account for 50% of VAT
Verdict: UNPROVEN

The Facts

Apple tax bill Source: Niall Carson/PA Images

Once again, due to the lack of systematic MNC tracking by Revenue, we’re forced to resort to figures for LCDs, as a proxy for MNCs. Which is unfortunate.

The October 2014 report states that: “LCD cases account for…52% of VAT”.

Again, given the very high level of overlap between LCD companies and MNCs as regards corporation tax, it is likely that MNCs do pay around 50% of VAT, but we cannot make this assumption.

We rate the claim UNPROVEN.

Claim: Multinationals account for 92% of customs and excise
Verdict: UNPROVEN

Firstly, it’s important to note that when companies pay Revenue excise, they then almost always recoup all of those payments, by adding to the price of products like tobacco, alcohol and fuel.

This is roughly analogous to the point made above about PAYE. The cost of whatever excise is paid by MNCs is ultimately borne, more or less, by the customers of MNCs.

And secondly, customs and excise are two separate levies. It seems likely Suzanne Kelly was referring only to excise, since the evidence she cited only refers to excise, but our request for clarification on this point was not answered in time for publication.

In any event, according to the October 2014 report: “LCD cases account for…92% of Excise…”

Again, based on the overlap, it seems likely that MNCs would pay somewhere in this region of excise to Revenue, but without a specific measure from Revenue, we cannot make this assumption.

We also rate this claim UNPROVEN.

To read Revenue’s 2014 report on corporation tax, click here.
To read their 2016 report on corporation tax, click here.

Send your FactCheck requests to factcheck@thejournal.ie

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About the author:

Dan MacGuill

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