Wednesday, 13 November 2019

Ceisteanna (36)

Joan Burton


36. Deputy Joan Burton asked the Minister for Finance if he has spoken to his EU counterparts about recent data from EUROSTAT that found Ireland to be the least taxed country in the European Union based on the ratio of tax collected to gross domestic product; and if he will make a statement on the matter. [46549/19]

Amharc ar fhreagra

Freagraí ó Béal (9 píosaí cainte) (Ceist ar Finance)

Is the Minister aware that, according to data from EUROSTAT, the European Union's statistics agency, and based on the ratio of tax collected to gross domestic product that Ireland is the least taxed country in the European Union? In 2018 the average European rate stood at 40.3%, whereas the rate in Ireland stands at 23%. What does the Minister propose to do to address this issue?

The publication identifies Ireland as having the lowest tax-to-GDP ratio in the European Union, at 23%. This low ratio, however, primarily reflects well known issues in the measurement of GDP in Ireland. As a result, this measurement is not an accurate reflection of the relationship between tax revenues and economic output in Ireland.

The Deputy will be aware of the work we have done to develop the gross national income*, GNI*, method of looking at national income where we strip out some of the effects of global companies and globalisation on the national accounts. As a result of this work, GNI* provides a better measure of national income, one that is more consistent with the actual level of economic activity taking place here. Accordingly, the share of tax revenue to output in Ireland is best measured by using GNI* as a base. Taxes, as a share of GNI*, amounted to 37.7% in 2018. This figure compares to EUROSTAT's recently reported EU-wide tax-to-GDP ratio of 40.3%. When the Deputy considers the more appropriate measurement of national income, tax revenue as a share of national income is still below the average for the European Union, but it is far less below the average rate than in using GDP as the denominator. It is a far more accurate metric to use to measure tax revenue as a share of national income.

First, will the Minister agree that the issue for Ireland is the fact that we have very low corporate taxes? For instance, institutions such as the banks, particularly the banks we bailed out, pay little or no tax. They pay a modest levy of €150 million on profits which now run into the billions of euro, an issue the Minister has refused to address. Second, middle and higher income workers are paying quite a lot of income tax. Low paid workers are paying relatively little tax, but they are paying PRSI. What we have is a complete distortion caused, in particular, by the very big international companies in Ireland and the fact that a lot of intellectual property has been brought to Ireland. That is seen as a scandal in the rest of the world and one can only describe it as such. Many poor countries struggle to survive because the big corporations are paying very little tax anywhere.

I notice an increasing tendency in the Labour Party to deny or share any of the experience it had in government. The Deputy was a member of a Government, a very fine member at that, who gave great leadership in the State at a very difficult time, during which she well understood the pressure the corporate tax regime was under. She understands and understood then the sensitivity of the matter of rates and all of the challenges surrounding it. What we have is an issue with the measurement of national income. That is the key issue. The Deputy is wrong to say, using this measurement of national income, that we should make a set of changes, one of which, in particular, could be very damaging. We have a corporate tax regime that levies tax on a very wide range of economic activity at a rate over which we are standing. It is not the case that I have refused to address the issue of the tax contribution made by the banks in Ireland. I have debated the issue with the Deputy on many occasions, but it is my view that changing the regime in the way the Deputy wants would have very serious consequences for other interests of the Irish taxpayer.

I thank the Minister for the compliment. Yes, I was one of the people who initiated the contacts with the OECD. We only have a limited amount of time before the rest of the world refuses to accept that in certain parts of the world there can be a situation where fabulously wealthy corporations make no tax contributions. We facilitate it, which is why I have been an advocate - the OECD is now also an advocate - of the making of minimum effective tax contributions. I have given the Minister a simple example. The banks in Ireland took the shirts off the backs of Irish workers when they were bailed out. I again acknowledge that when the Labour Party was in government, I was very much the author of the bank levy and the proposal made to the Minister's predecessor. It yields €150 million, but I am citing the small example of the banks. Paul Krugman, the Nobel economics prize winner, used the term "leprechaun economics" to describe the phenomenon the Minister has just described. When will the Minister get banks and other very large corporations to pay a fair share of tax?

The Deputy has made the assertion that we facilitate very large companies in paying no tax. What we do is we implement our tax policy fairly without regard to any company or individual. The Deputy has given no recognition to the many changes made in our corporate tax policy, including by me, in recent years whereby we have dealt with issues related to hybrids and how tax is levied when income leaves the State. The Deputy will also be aware of the changes made by the previous Government that continue to implemented by the Government. The Deputy may throw around charges of leprechaun economics which she has just repeated for her own political benefit-----

No, Paul Krugman said it.

-----but it is my job to ensure our reputation will continue to be built because of the changes we are making. If I was to make any of the changes the Deputy is recommending and they resulted in the loss of a single Irish job, she would be the first Deputy to come into the House to castigate me for doing so.

Deputy Broughan has the next question. I know that he will observe the time limits.