Dáil Éireann Debate, Tuesday - 16 November 2004
109 Mr. Noonan asked the Minister for Enterprise, Trade and Employment the representations he has received regarding the rate of corporation tax; if he envisages the rate being amended in the near future; the effect that the lowering of the rate to 12.5% in 1997 has had in terms of foreign direct investment; and if he will make a statement on the matter. [28390/04]
View answerAs Deputies are aware, the Minister for Finance is responsible for tax policy and has made clear that the Government is fully committed to maintaining the 12.5% corporation tax rate which became effective for all trading income from 1 January 2003. As the Deputy is aware, Ireland's long-standing policy of low corporation tax has been a fundamentally important element in the attraction and development of top quality investment here. The decision to introduce the 12.5% per cent corporation tax rate was announced in 1997 and phased in by average reductions in the standard rate of 4% per annum over six years. The measure was given effect in the Finance Act 1999, which provided that the 12.5% rate would apply to trading income for the financial year 2003 and each subsequent financial year. The legislation sets out the future tax regime for business in clear and unambiguous terms.
I stress to the Deputy that the 12.5% rate was only effective from 1 January 2003 despite being announced in 1997 as posed in the question. The 10% tax rate will apply to some pre-existing trades until 2010. It is too early to say what the ultimate effect on foreign direct investment has been to date. However, it should be noted that the OECD in its 2004 report, Trends and Recent Developments in Foreign Direct Investment, shows a predicted increase in foreign direct investment inflows to Ireland in 2003. The report states that while total foreign direct investment in the OECD countries declined by an estimated 28% in 2003 from US$535 billion in 2002 to US$384 billion in 2003, in Ireland foreign direct investment is estimated to have increased by some 4.5% from US$24.4 billion to US$25.5 billion over the same period. These statistics demonstrate that Ireland has maintained a strong position in terms of attracting and retaining foreign direct investment in a difficult global economy.
While this strong performance cannot be attributed solely to the 12.5% tax rate, I am in no doubt that it has played a very significant part. On a recent trip to the US, senior executives of several multinational companies reiterated to me the importance of our 12.5% corporation tax rate in preserving our attractiveness for further investment.
