Ruth Coppinger
Question:264. Deputy Ruth Coppinger asked the Minister for Finance the amount that could be raised by increasing Corporation Tax to 20%, the standard rate of PAYE for workers. [25343/16]
View answerFriday, 16 September 2016
Questions (264, 265)
Ruth Coppinger
Question:265. Deputy Ruth Coppinger asked the Minister for Finance the amount that could be raised by increasing the effective rate of corporation tax to the effective rate of income taxation, PAYE and USC, for workers on the median wage. [25344/16]
View answerWritten answers
I propose to take Questions Nos. 264 and 265 together.
I am advised by the Revenue Commissioners that it is not possible to accurately estimate the additional revenue that may be brought in from increasing the 12.5% corporation tax rate to either the standard rate of income tax or the effective rate of tax for workers on the median wage. This would require ex ante knowledge of any behavioural changes on the part of taxpayers as a consequence. In terms of any increase in the 12.5% rate, the negative impacts of behavioural effects on the corporation tax yield are likely to be relatively significant. Additionally, due to the interaction of reliefs and allowances after the calculation of gross tax at the various corporation tax rates, it is not possible to identify the amount of receipts that are in respect of profits taxable at the 12.5% rate alone. However, I am advised by Revenue that the vast majority of the net receipts are from the 12.5% rate of tax.
The Deputy may wish to note the published statistics regarding corporation tax receipts available on the Revenue website at http://www.revenue.ie/en/about/statistics/net-receipts.pdf. The Deputy may also wish to note that an analysis of the Corporation Tax payments in 2014 and 2015 has been published via the following link http://www.revenue.ie/en/about/publications/corporation-tax-receipts-2014-2015.pdf and further information on corporate profits, before allowing credits and reliefs are published at http://www.revenue.ie/en/about/statistics/corporation-tax-calculation.pdf.
In 2014 the Department of Finance carried out and commissioned extensive research which sought to quantify the effect of corporation tax policy on the Irish economy. The comprehensive Economic Impact Assessment of Ireland's Corporation Tax Policy was published on the Department's website on Budget day. As part of this project, the Economic and Social Research Institute ('ESRI') were commissioned to carry out a study into the impact that the corporation tax rate has on the decision of firms to invest in Ireland. This independent research found that if Ireland had increased the 12.5% corporation tax rate it would have considerably reduced the amount of Foreign Direct Investment ('FDI') into Ireland.
The maintenance of the standard 12.5% rate of corporation tax is therefore important for Ireland's economy. Ireland, like other smaller member states, is geographically and historically a peripheral country in Europe. A competitive corporate tax rate is a tool to address the economic limitations that come with being a peripheral country, as compared to larger core countries. Ireland's corporation tax rate plays an important role in attracting FDI to Ireland and thereby increasing employment here. This evidence underpins the Government's continued commitment to the 12.5% rate.