Wednesday, 19 June 2019

Questions (57, 72)

Maureen O'Sullivan


57. Deputy Maureen O'Sullivan asked the Minister for Finance if he will report on efforts to broaden the tax base; and his views on whether reliance on corporation tax is unsustainable. [25438/19]

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Jonathan O'Brien


72. Deputy Jonathan O'Brien asked the Minister for Finance the way in which he plans to broaden the tax base in a progressive manner further to the criticism of the Irish Fiscal Advisory Council of the over-reliance on corporate tax receipts; and if he will make a statement on the matter. [25550/19]

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Written answers (Question to Finance)

I propose to take Questions Nos. 57 and 72 together.

Ireland has been consistently successful over several decades in attracting leading multinationals to base here and given our high level of integration with the global economy, it is not altogether surprising that our corporation tax base has become concentrated, as it has been for a number of decades.

Nonetheless, I would acknowledge that there are risks associated with this increase in corporation tax receipts. A fiscal vulnerability exists in the form of an exposure of the public finances to fluctuations in corporation tax receipts, which last year were at their highest ever share of Exchequer revenues at 18.7 percent of overall tax receipts. By way of context VAT and Income Tax receipts accounted for approximately 64 percent of our overall tax receipts. 

In recent years, I have taken steps to broaden our corporation tax base, including through the introduction of the 80 per cent cap on capital allowances for intangible assets in Budget 2018 and the introduction of a broader Exit Tax regime in Budget 2019.  Measures have also been introduced in recent years which will ensure a continued broadening of the overall tax base. These include the introduction of the Universal Social Charge, the Local Property Tax and the sugar-sweetened drinks tax. Further measures that I have taken which will enhance the tax base include the increase in the VAT rate, for tourism related goods and services, from the 9 per cent rate to the 13.5 per cent rate in Budget 2019. For 2019 all of these measures are projected to raise revenues equivalent to approximately 1.5 percent of GDP or 5.7 percent of overall general government revenue. 

Further steps which I have taken include an increase in the commercial (non-residential) Stamp Duty rate from 2 per cent to 6 per cent in Budget 2018 and an increase in the betting duty levy from 1 per cent to 2 percent in Budget 2019. I have also removed some tax reliefs, such as the Home Renovation Incentive and the Start your own Business Relief, and continued a roll-out of enhanced taxation compliance measures. However, I would note that further potential for base broadening exists, particularly in the environmental area where important policy priorities exist.

The ongoing systematic review of tax expenditures, taken in line with my Department’s Tax Expenditure Guidelines, will assist in this process, through identifying deadweight, resource misallocation and assessing if tax reliefs still meet their initial policy objectives. This will also provide a ‘health check’ as to whether they accord with the OECD tax hierarchy in terms of their impact upon economic growth.  

My Department will shortly publish a paper to highlight some of these in-built vulnerabilities to our tax revenues and to quantify where possible, the impact of a shock to our corporation tax receipts. Potential solutions to this are presented in order to prompt a policy discussion around how best to mitigate against this emerging over-reliance. It is my intention to give consideration to these, and possibly other, suggestions with a view to making recommendations to Government in the autumn.