Wednesday, 13 November 2019

Ceisteanna (34)

Bernard Durkan


34. Deputy Bernard J. Durkan asked the Minister for Finance to outline the degree to which he remains satisfied that his budgetary strategy remains on target, irrespective of Brexit or international pressures; and if he will make a statement on the matter. [46602/19]

Amharc ar fhreagra

Freagraí ó Béal (6 píosaí cainte) (Ceist ar Finance)

With this question I seek to ascertain the extent to which the Minister remains confident that the budgetary projections identified in budget 2020 will continue to remain valid throughout.

The Government decided in September that budget 2020 would be based on the assumption of a disorderly Brexit at the end of October. Given the information available at the time, this was the safest and most appropriate course of action. Since I published budget 2020, the risk of the United Kingdom departing the European Union this year without a deal has been reduced. However, the ultimate outcome is still highly uncertain and a disorderly Brexit in 2020 remains a possibility.

Should the United Kingdom leave the European Union on an orderly basis, Ireland's fiscal position will, all else being equal, improve relative to budget 2020 projections, with increased revenues and lower expenditure. The fiscal forecast published with the summer economic statement in June is instructive on the budgetary position in an orderly scenario. The summer economic statement outlined the path for the headline deficit, which involved a technical assumption of tax reductions of €600 million each year and an increase in annual current spending of 3.25%. In such a scenario the summer economic forecast indicated a surplus of 0.4% of national income in 2020.

As I indicated yesterday to the Committee on Budgetary Oversight, I believe it is likely yet again that we will see corporation tax receipts for this year exceed where they were one year ago. We expect the figure to be higher than the projected €11 billion. We expect it be to in line with or above the €11 billion now included in our forecast. That is significantly ahead of what I indicated one year ago. However, I also said that while I expected us to face into another year of potential growth next year in our corporation tax receipts, I also believed it was likely that at some point in the near future that growth would stabilise and then begin to decline. That is why I believe it is now really important that the surplus we established this year is built again if we avoid a no-deal scenario next year. The country must get into the habit of ensuring we run regular surpluses in order that in the event of money not being available to us in future we will not face the risks we have faced in the past.

I thank the Minister for his reply and preview on "Morning Ireland" today. I presume he has assured himself that the targets are prudent and attainable and that they will stand the test of time. Are there external issues other than Brexit that might impact to some extent or other in the course of the year?

While the answer I gave on "Morning Ireland" may have been a preview of the position today, it was a review of the postion yesterday. I went through many of these issues yesterday with the Deputy's colleagues at the Committee on Budgetary Oversight. For the benefit of all colleagues, I will emphasise some of the points I made. They relate to the point the Deputy put to me about other issues in addition to Brexit emerging. In particular, from a tax point of view, I highlighted three issues, the first of which is the increased level of corporation tax receipts, a large amount of which is attributable to the large increase in corporate profitability associated with several large companies. Were this ever to change at some point in the future it is likely it would have an impact on the tax receipts that we are discussing. The second factor of which we have to be mindful is that we could face a situation where corporation tax arrangements would become more competitive in other countries.

The consequences of OECD reforms, and the changes I have touched on on a number of occasions, could be a factor for Ireland as well.

In the event of a negative decision, from Ireland's point of view, in the case before the European courts in respect of corporation tax, might there be a tendency on the part of some foreign direct investment prospects to locate elsewhere?

It would probably be premature to say investors or large companies might invest elsewhere as a result of the Apple ruling, particularly as regards companies that are already here. However, the loss of the Apple case would pose exceptionally important challenges for our corporate tax policy, requiring deeply serious consideration. I am very conscious of the magnitude of €14 billion and it would require defending some very important principles, that are worth defending, in order to be able to explain to the Oireachtas how the money is not ours and why we should not collect it. The principle cuts to the core of tax policy, which is that all taxpayers are treated equally and any company that locates in our country will be treated the same as another company. This cuts to the heart of our tax code.