The Revenue Commissioners are not expecting any substantial uplift in tax revenues next year when at least 2,900 companies move to the higher rate of corporation tax, from the current rate of 10%.
A large number of manufacturing companies will have to shift onto the 12.5% rate from 31 December 2010. Before the current recession this was expected to provide something of a windfall for the Revenue Commissioners.
But due to the deep slump this additional income stream will be greatly reduced. The trading profits of manufacturing companies, IFSC-based firms and organisations operating out of the Shannon Airport zone will all move onto the higher rate. The definition of a "manufacturing" company is very broad, with even some newspaper publishers included in the category.
The Revenue Commissioners only have 2006 figures for the number of companies paying the lower rate. But the overall figure is likely to be more than 2,900. The Revenue Commissioners have considered the potential increase in receipts, but were not expecting it to be substantial.
"It is not possible to accurately forecast the potential yield from the abolition of manufacturing relief. The historical information shows that for the latest full year of returns available (2006 accounting period), over €400m of manufacturing relief was used but it is likely, given the current economic climate, that the yield from the increase in the rate will be substantially lower than this,'' said a Revenue spokesman.
In 2008 the Revenue managed to collect more than €5bn in corporation tax receipts, far below the original target of €6.7bn. The pervious year the Revenue managed to collect €6.3bn in net corporation tax receipts.
Meanwhile the Revenue have invited practising solicitors to tender for services to collect certain Revenue debts.
The work involves debt collection proceedings in the District, Circuit and High Courts for the recovery of tax and interest due, the organisation said last week. "In all cases, instructions to the solicitor will be for the recovery of a specified amount together with interest accrued. The amount will arise either from a declaration of liability in a return made by the customer or from an estimate of liability," it said.
The Revenue Commissioners recently said they understood a large number of firms were under financial pressure at present. The organisation's chairwoman Josphine Feehilly said it was best if companies with problems came forward, rather than try to avoid confronting their tax liabilities.