I can confirm that I and my Department continue to seek ways to broaden the tax base that do not run contrary to the growth focus of this Government.
Certain measures have already been introduced 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 per cent of GDP or 5.7 per cent of overall general Government revenue. I would also note that further potential for base broadening exists, particularly in the environmental area where important policy priorities exist.
Also in Budget 2019 the income tax package was primarily comprised of an increase of €750 in the point of entry to the higher rate of income tax, a reduction in the third rate of USC and an extension of the income range on which the second rate of USC will be charged. This continued the focus on reducing the tax burden on low to middle income earners, while maintaining a broad tax base.
The Deputy will be aware that in recent years I have taken steps to broaden and enhance the stability of 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. Given that Ireland has been consistently successful over several decades in attracting leading multi-nationals 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.
Nonetheless, I would acknowledge that a fiscal vulnerability exists in the form of a significant and growing exposure of the public finances to corporation tax receipts, which last year were at their highest ever share of Exchequer revenues at 18.7 per cent of overall tax receipts. My Department will shortly publish a paper to highlight some of these in-built vulnerabilities and to quantify where possible, the impact of such a shock. 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.