Ryanair is paying no tax -- despite a record €3bn sales
But O'Leary may face personal tax bill of €12m
Michael O'Leary. Photo: Getty Images
Michael O'Leary's Ryanair effectively paid no corporate tax in its 2009 financial year, despite generating record sales of nearly €3bn.
The low-cost airline -- now Europe's biggest -- ended up with a €1.5m tax refund, more than cancelling out the modest €425,000 it owed in taxes at year end, according to expert analysis of its financial statements carried out for the Sunday Independent last week.
"The 'tax refund' of €1.5m refers to the normal refund of advance corporation tax paid by Ryanair in circumstances where our substantial Capital Allowances exceed our tax charge," Ryanair told the Sunday Independent.
Last week, Michael O'Leary announced that the airline was to pay a special dividend of €500m to its shareholders, with another €500m possibly paid out before 2013. The maverick champion racehorse owner is in line for an initial €20m payout. However, last week he indicated that a large chunk of this windfall would go in personal taxes.
"About €12m gets paid in tax to the Irish Government," he said. "I'm sure of the remaining, my wife will probably take about four, and the balance will go on paying Ryanair's check-in fees and excess baggage fees on the O'Learys' family holiday. There will be very little left for me, I will just have to keep working."
O'Leary's €12m tax payment is more than the amount of State aid backing 250 new jobs at Dublin Airport after the Government shunned Ryanair's offer to create 400 other jobs at hangar 6. Ryanair has estimated that Enterprise Ireland will have spent €10m to support the jobs at Eirtech and Dublin Aerospace. When the Government dropped the ball over hangar 6, Ryanair was forced to site its new maintenance operation abroad.
A key part of the tax reduction strategy was to offset allowances generated during its vast €4bn airplane-buying spree against its earnings. Ryanair was also able to legally avoid paying tax as, despite its record revenues, the company took a €220m hit on the value of its stake in Aer Lingus and used up various other tax allowances, according to financial information in its annual report. Ryanair subsequently reported a pre-tax loss of €180m for the year ending March 2009. The company's annual report shows that it paid its auditors KPMG €249,000 for tax advice on top of its standard audit fee.
By using various allowances and accountancy methods, Ryanair has been able to keep its average corporate tax rate at well below the current 12.5 per cent Irish tax rate.
While the year to March 2009 saw the airline pay no tax, other years were almost as low. Annual reports reveal it had an effective tax rate of just 3.4 per cent in 2007, with an effective tax rate of 9.4 per cent in 2006.
Last week, Exchequer returns revealed the shocking state of government coffers. Corporation tax receipts have fallen off a cliff, with the latest projection suggesting that companies will pay 19 per cent less tax this year. Just €3.16bn is expected to be paid in corporation tax this year, down from €3.9bn last year.
- Nick Webb
Originally published in
