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Dáil Éireann debate -
Thursday, 25 Jun 1998

Vol. 493 No. 2

Written Answers. - Corporation Tax.

Joe Higgins

Question:

137 Mr. Higgins (Dublin West) asked the Minister for Finance the estimated cost to the Exchequer in 1998 as a result of the fact that the standard rate of corporation tax is 32 per cent and the reduced rate on the first £50,000 is 25 per cent when the estimated revenue resulting from these changes is compared with the revenue that would accrue if the rate of corporation tax was 50 per cent excluding the effect of the abolition of tax credits. [15548/98]

It is difficult to provide a realistic estimate of the net corporation tax revenue that would accrue with a standard rate of 50 per cent. I have no doubt that if the rate was increased to 50 per cent this would have the effect of hugely slowing down business investment and confidence thereby reducing overall profit levels and tax revenues.

Each 1 per cent change in the standard rate of corporation tax of 32 per cent is estimated to alter tax revenue by about £24 million. It is not reasonable, however, simply to factor this up by an appropriate multiplier to determine what an increase in the corporation tax rate to 50 per cent would yield.

In 1987, when the standard rate of corporation tax was 50 per cent, there were many reliefs available such as accelerated capital allowances. As the rates have been reduced, many of these reliefs have been curtailed and the base broadened. This factor, combined with a growing economy has increased the yield from £255.7 million in 1987 to £1697.1 million in 1997, even though the rates have been reduced.

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