Michael Creed
Ceist:38 Mr. Creed asked the Minister for Finance his views on whether there is any merit in reviewing the 10 per cent manufacturing tax rate in an effort to stimulate employment.
Written Answers. - Manufacturing Tax Rate Review.
The 10 per cent rate for manufacturing industry was introduced in 1980, and was designed to replace the existing schemes of export sales relief and Shannon exemption. It is a key incentive in the attraction of a substantial amount of mobile international investment to this country, in the provision of a very significant number of related jobs and also in assisting the expansion of domestic manufacturing companies. This investment has led to major job creation in this country. Over 900 overseas firms are established here, employing an estimated 90,000 people, out of our total manufacturing workforce of over 200,000. The manufacturing sector supports an estimated further 160,000 jobs in services, subcontracting and so on.
The decision to extend the life of the 10 per cent rate was undertaken following a review of the incentive. The 10 per cent rate has been due to expire at end December 2000 and the Government provided for its extension for a further ten years in the Finance Act, 1990. This extension enables the industrial promotion agencies to continue to attract vital overseas investment in manufacturing, in the face of ever-increasing international competition.
In so far as the Government's objectives involving tax rates in general and the issue of employment are concerned, these have already been clearly set out in the revised Programme for Government. In the income tax system various reforms over recent years have been addressed at reducing the impact of tax on earnings from employment, and the Government's objectives of a 25 per cent standard rate and a single higher rate of 44 per cent are directly aimed at lowering marginal tax rates and improving the incentive to work and enterprise. In the corporation tax system, substantial reforms since 1988 have, inter alia, been aimed at reducing distortions favouring the use of capital as against labour.