Irish Ferries has emerged as one of the main beneficiaries of an obscure tax break which means it pays a nominal tax on its profits. Liam Reid, Political Reporter, reports.
The company, which currently is at the centre of a controversy surrounding the level of wages paid to foreign contract workers, is estimated to have saved nearly €3 million in 2003 due to the scheme, which is known as tonnage tax.
According to documents prepared for the Government's tax strategy group in 2001, Irish Ferries threatened to move its operations out of Ireland if the Government did not bring in such a scheme, which has been approved by the European Commission.
There have now been calls from opposition TDs for a "full disclosure" by Minister for Finance Brian Cowen on the number of vessels qualifying for the scheme and its cost to the Exchequer.
The tonnage tax regime was highlighted in a Primetime Investigates documentary on RTÉ on Monday night which reported that a luxury Irish-owned charter yacht, the Christina O, could qualify for the tax break as it had been reclassified as a passenger ship.
Under the scheme, introduced in 2003, companies engaged in certain shipping activities can opt to pay 12.5 per cent tax on a "notional profit" or tonnage tax, which is based on the size of their ship.
The Irish Marine Development Organisation, a State agency established to promote Ireland as an international location for shipping activity, describes the system in promotional literature as giving companies a tax bill "that bears no relationship with the real profits generated by the company".
In the case of Irish Ferries, this notional profit is estimated at less than €20,000 for its four ships. The company, which is part of the Irish Continental Group (ICG), has been making profits before tax and exceptional items of between €24 million and €30 million in recent years.
In 2002 the group, which also includes other activities that do not qualify for the relief, paid €3.1 million in tax. In 2003, after the tonnage tax scheme was introduced, the tax bill had dropped to €300,000.
Labour finance spokeswoman Joan Burton criticised the fact that Irish Ferries was entitled to such a tax break, in the light of questions about the pay and conditions of some workers on their boats.
"This is part of the cloud of secrecy that surrounds Irish tax culture when it comes to companies, and we are calling on the Minister for Finance to provide full disclosure on the number of vessels that qualify and the amount of tax that is forgone from the measure," Ms Burton said.