Trevor Sargent
Ceist:86 Mr. Sargent asked the Minister for Finance his views on whether a 17.5% corporation tax would ensure international competitiveness while ensuring a fairer tax base which needs to be broadened. [21302/02]
Written Answers. - Corporation Tax.
The 12% corporation tax rate on trading income from 2003 is a key element in Irish industrial development policy and in attracting significant foreign investment generating significant employment. The origin of this policy goes back to 1956 when export sales relief, that is, no tax on manufacturing exports, was introduced. This was changed to a 10% corporation tax rate for manufacturing in 1980 after our entry into the EU. This 10% rate will continue for companies which were entitled to it before 31 July 1998 until 31 December 2010. In 1997 the EU Commission decided that the 10% rate was a State aid and the then Government decided to introduce a single rate of 12.5% corporation tax on trading income across the board. This was confirmed and implemented by the present Government and the 12.5% rate will come in on 1 January 2003.
The decision on a 12% rate was made on the basis that such a rate would best ensure Ireland's continued attractiveness as a location for business development and job creation. The decision is enshrined in legislation and widely publicised internationally, when marketing Ireland as a business location. It is my firm view that to change this policy now and increase the current 16% rate to 17% would have unacceptable consequences for Ireland in this international context.
With regard to the tax base, it should be noted that corporation tax receipts have increased from €1.8 billion in 1996 to €4.1 billion in 2001, an increase of about 125%, despite the reduction in the rate for some companies. The share of corporation tax in the total tax take in Ireland, at almost 15% in 1999 and again in 2001, is significantly higher than the EU average which was 8.7% in 1999, which is the latest year for which OECD comparative data are available.