Dáil Éireann Debate, Wednesday - 10 May 2017
105. Deputy Pearse Doherty asked the Minister for Finance the methodology and components of same used to calculate the corporate tax revenues to the Exchequer for 2017; the extent to which 2016 corporate tax receipts played in this calculation; and if he will make a statement on the matter. [22241/17]
Amharc ar fhreagraIn general, forecasts for all tax-heads use a broadly similar methodology. Specifically, in relation to the Budget 2017 forecasts in respect of corporation tax the approach is set out below.
Firstly an estimate of the 2016 outturn was calculated last October, which became the starting point for 2017, or base year outturn. This starting point is then adjusted to take account of any known one-offs from the previous year or any one-off payments/refunds likely to occur in-year, which are provided by the Revenue Commissioners. In addition, any carryover effects from previous budgets are incorporated into the forecast at this stage.
Taking account of these factors the “clean base” is then grown by the macro-economic data, and relevant tax elasticities. For corporation tax, the macro-economic driver applied is Gross Operating Surplus. Following this, relevant policy changes such as Budget day corporation tax changes, which are costed by the Revenue Commissioners, are incorporated into the forecast.
As a final check the forecasts are reviewed to determine whether the response of taxes to growth in the macro/tax base will change over time. If it is the case that certain taxes are more responsive during cyclical upswings or downturns, then judgment can be incorporated to enhance the overall accuracy of the forecast.
It should be noted that Irish Fiscal Advisory Council (IFAC) have stated previously that judgment can enrich the accuracy of the forecasts. It is important to point out that all the macro-economic data used in the official fiscal forecasts are endorsed by the IFAC in advance of the Budget or Stability Programme Updates. In addition, IFAC are responsible for assessing and commenting on the Governments fiscal forecasts and on the fiscal stance, as well as assessing compliance with fiscal rules.
It should be noted that the 2016 actual outturn of €7,351 million was €164 million or 2.2% below the October 2016 estimate.
Finally, Budget 2017 outlines the risk to the forecast which exists between the ‘two pack’ requirement for an October Budget and the strong distribution of certain receipts such as corporation tax to later in the year. This presents an in-built potential for volatility.
