Wednesday, June 14, 2023

Ireland in the 2020 Country-by-Country Data for US MNCs

As a result of BEPS 1.0, large MNCs have been filing country-by-country reports with their home tax authority since 2016.  Using these tax authorities can publish aggregate statistics and the OECD itself has a partial database of these although it currently only goes up to 2018. For US MNCs, the IRS have now published data up to 2020.

These figures are not national accounts data and there is a number of issues with them but they are still useful. We will look at the 2020 figures published by the IRS and, in particular, the figures for Ireland. This is relevant given the very significant presence of US MNCs in Ireland.

First we will start with the payments of corporate income taxes.  Per the CbCR reports filed with the IRS the US MNCs covered paid $310 billion of corporate income taxes in 2020.  This is on a “cash basis”, i.e. net payments of tax to governments around the world. Unsurprisingly, the biggest share of these payments went to the U.S. itself.  The reporting companies made $192 billion of cash payments to corporate income taxes in the U.S.

Here are the top 25 recipients of corporate income taxes from US MNCs in the IRS CbCR data for 2020.

IRS Cash Tax Paid CbCR Chart 2020

Across the EU, the US MNCs in the CbCR data made $35 billion of cash tax payments in 2020.  Ireland is by far the largest recipient of corporate taxes from US MNCs in the EU.  In 2020, Ireland received more corporate tax from US MNCs than the combined total for every country from Italy down in the following chart.

IRS CbCR for the EU27 Tax Payments 2020

The nominal figures, of course, don’t tell the full story. In relative terms, $1 billion of tax payments in Ireland is very different to $1 billion of tax payments in, say, France.  Here are the corporate tax payments of US MNCs relative to the Net National Income (NNI) of each Member State.

IRS CbCR for the EU27 Tax Payments to NNI 2020

Using NNI means we don’t have to do any adjustments for the distortions that can appear in GDP data.  All the above chart does is put the cash tax payments figures from the IRS as a percent of the net national income figures from Eurostat.  The tax payments are converted from dollars to euro using the average exchange rate for the year (1.142).

For the EU as a whole the corporate tax payments of EU MNCs are equivalent to 0.3 per cent of NNI. For Ireland the share is 5.5 per cent.  It exceeds 1.0 per cent in only one other country and the result for Luxembourg is only one-third of that for Ireland.

Putting them in per capita terms may be an easier concept to grasp.  For a population of 5 million the near €10 billion of tax payments from US MNCs is equivalent to near €2,000 per capita.  The equivalent figure for Germany is €67 while for France it is €46 with Italy at just €27.

IRS CbCR for the EU27 Tax Payments Per Capita 2020

The effective tax rates of US MNCs across the EU are shown next. In this instance, the analysis is limited to entities reporting positive profits to ensure that the effective rates are not artificially higher due to the inclusion of losses.

The effective tax rates faced by US MNCs vary from 29.5 per cent in France to 1.3 per cent in Luxembourg.  The effective rate in Ireland, 12.6 per cent, is at the lower end with eight EU countries have a lower rate in 2020.

IRS CbCR Effective Tax Rates in EU27 2020

As well as tax details, the country-by-country data also gives some insight into the substance US MNCs have around the world including employees and tangible assets.

The 1,750 or so US MNCs in the CbCR statistics had around 2.7 million employees in the EU in 2020.  Of this, the largest amounts were in Germany and France where they had 570,000 and 370,000 employees respectively.  The 172,000 employees in Ireland is the eighth-highest amount in the EU.  Of the 1,750 MNCs who filed country-by-country reports with the IRS, 660 included Ireland as a jurisdiction in which they operated.

IRS CbCR Employees Number in EU27 2020

The get an insight into the relative importance of employment in US MNCs in each Member State we can combine the IRS data above with total employment figures from Eurostat.  This shows that employment in US MNCs is just over one per cent of total employment in Germany and France.  For Ireland, the equivalent share is 7.5 per cent, the highest in the EU.  Next highest is Luxembourg where the 15,000 employees they have there is just over five per cent of total employment.

IRS CbCR Employees Share of Total Employment in EU27 2020

The second indicator of substance in the IRS data is the value of tangible assets, other than cash and cash equivalents, that US MNCs have in each country.  This assets would include factories, buildings, plant, equipment etc.

IRS CbCR Tangible Assets in EU27 2020

In 2020, US MNCs valued the tangible assets of their Irish entities at $110 billion.  This was the highest in the EU and is more than France, Italy and Spain combined.

Indeed, the tangible assets that US MNCs report for Ireland is one of the highest in the world.  The reporting groups indicated that they had a total of $8.6 trillion in tangible assets of which $6.2 trillion, 72 per cent, were located in the U.S. itself.  The following charts shows the highest jurisdictions excluding the U.S.

IRS CbCR Tangible Assets 2020

The amount of tangible assets reported for Ireland is the fourth-highest in the world, lower only than the U.S., the U.K. and Canada.  Indeed, the standalone figure for Ireland is more than twice the combined figure for the continent of Africa as a whole. 

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