CORPORATE TAX:COMPANIES AND some categories of businesspeople used losses carried forward and their involvement in capital tax allowance schemes to reduce their tax bills in 2009 by an estimated €2.5 billion, according to the Comptroller and Auditor General.
The total take from corporation tax in 2009 was €3.9 billion, according to John Buckley’s report.
He said he expected that the overhang of losses in the economy would have a significant effect on future tax revenues.
Companies, sole traders and partnerships can use losses incurred in a particular year to claim tax rebates on tax paid in the previous year. Or they can use those losses against profits in subsequent years. They can also reduce their tax bills through capital allowance schemes.
Figures supplied by the Revenue to the comptroller’s office indicate that losses and capital allowances totalling €49.6 billion were available to be carried forward and offset against profits in 2010 and subsequent years. The estimated losses used in 2009 to reduce tax bills was €19.9 billion.
However, about €34.3 billion of the amount available to be carried forward into 2010 arose from losses in the financial sector, with just over half of this relating to three banks whose loans have been moved to Nama.
The Revenue told Mr Buckley it was difficult to estimate the effect on future tax yields of unused losses. The companies have to generate profits against which the losses can be set. The chairwoman of the Revenue Commissioners, Josephine Feehily, told Mr Buckley she believed the amount of unused losses was likely to remain significant.
Just five companies accounted for €28 billion of the losses in the finance sector and three of these companies were in Nama, she said.
Two of the five companies, Anglo and Nationwide, account for approximately 45 per cent of the unutilised losses and are due to be wound down.