Michael Noonan (Limerick City, Fine Gael)
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It is assumed that the threshold for the proposed new tax band mentioned by the Deputy would not alter the existing standard rate band structure applying to single and widowed persons, to lone parents and married couples. I am advised by the Revenue Commissioners that the estimated full year yield to the Exchequer, estimated by reference to 2012 incomes, of the introduction of a new 48% rate would be of the order of €380 million. However, given the current band structures, major issues would need to be resolved as to how in practice such a new rate could be integrated into the current system and how this would affect the relative position of different types of income earners.

This figure is an estimate from the Revenue tax-forecasting model using latest actual data for the year 2009, adjusted as necessary for income and employment trends for the year 2012. It is therefore provisional and subject to revision.

Michael Noonan (Limerick City, Fine Gael)
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I am advised by the Revenue Commissioners that the information requested, estimated by reference to the income tax year 2011, is set out in the following table.

It should be noted that the income ranges shown in the above table relate to Gross Income as defined in Revenue Statistical Report 2009.

The figures are estimates from the Revenue tax-forecasting model using actual data for the year 2009 adjusted as necessary for income and employment trends in the interim. These are, therefore, provisional and likely to be revised.

It should be noted that a married couple who has elected or has been deemed to have elected for joint assessment is counted as one tax unit.

Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that the standard basis for any estimate of the tax yield from the action suggested by the Deputy would be the tax returns filed for the year 2009 (the latest year for which such information is available). Assuming that the proposed levy would apply to the same taxable income of all companies to which current standard rate of corporation tax rate applies, a straight line estimate of the nominal full year yield to the Exchequer from imposing an additional tax rate of 3.5% could be of the order of €980 million. In reality, this level of additional tax revenue will not be realised due to behavioural change on the part of taxpayers as a consequence of such a measure which would be a significant factor given the scale of the increase suggested in the question. Estimating the size of the behavioural effects of a change of this nature is difficult but they are significant. An OECD multi-country study found that a 1% increase in the corporate tax rate which is what the levy would be, in effect, reduces inward investment by 3.7% on average. In other words, it would take only a 2.5% increase in the rate (to 15%) to decrease Ireland's inward investment by nearly 10%. (This assumes the average applies across the board – but in fact it is likely to be more extreme for Ireland). Recent research by the OECD also points to the importance of low corporate tax rates to encourage growth. In ranking taxes by their impact on economic growth, corporate tax was found to be most harmful. In other words, governments seeking additional tax revenues would be advised to consider increasing all other types of tax (property, consumption and income) before increasing corporate taxes.

The very major importance to Ireland's international competitive position of maintaining the standard 12.5% rate of corporation tax in the current climate must also be borne in mind. Ireland (like other smaller member states) is geographically and historically a "peripheral" country in Europe. A low corporate tax rate is a tool to address the economic limitations that come with being a peripheral country, as compared to "core" countries.

Michael Noonan (Limerick City, Fine Gael)
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I wish to advise the Deputy that companies operating in Ireland are chargeable to corporation tax at the 121⁄2 per cent rate on their trading profits. A higher 25 per cent rate applies in respect of investment, rental and other non-trading profits and chargeable capital gains. This rate also applies in respect of certain petroleum, mining or land dealing activities. The 10 per cent corporation tax rate for profits from manufacturing expired at the end of 2010 and the 121⁄2 per cent rate now applies to such profits. Accordingly, all companies operating here pay corporation tax at the 12 1⁄2 per cent rate or at the higher 25 per cent rate on their taxable profits. The ongoing yield from corporation tax reflects this position and the question of additional revenue as suggested by the Deputy does not therefore arise. There are different ways of measuring the effective rate of corporation tax depending on the variables that are used and it is difficult to determine a general or single reliable comparative measure of an effective tax rate. This fact is acknowledged in the TCD Discussion Paper referred to by the Deputy.

I am not in a position to comment on the calculations that underpin the figures in the TCD study referred to by the Deputy. However, other recent studies by international accountancy firms and the European Commission have shown that Ireland has an effective tax rate which is close to the statutory 12 1⁄2 per cent rate. This is only to be expected as Ireland's 12 1⁄2 per cent corporation tax regime is transparent, does not discriminate based on company size or ownership and applies across a broad base.

Michael Noonan (Limerick City, Fine Gael)
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The theory behind site value tax – or land value tax, as it is often called – is that tax is calculated by reference to the value of the land or site irrespective of whether there is a property on the site, or of what type of property is in place. I am informed by the Revenue Commissioners that they have no statistical basis for compiling estimates in relation to site values. I am not aware that any other agency has such information. The value of land has decreased in recent times, which would affect the potential yield. The return from a site value tax would also depend on whether the tax applied to all land or only to certain types of land, such as residential land. It is therefore not possible for my Department to provide the information requested by the Deputy on the potential return from a site value tax.

A decision has yet to be taken on what form of property tax will be introduced, whether a site value tax or some other form, the precise legal mechanism to be used to introduce the tax, and whether this will be done in tax legislation such as the Finance Bill or through other legislation which may fall within the ambit of the Department of Environment, Community and Local Government.

The Deputy will be aware that the Government has decided to introduce a household charge at a flat rate of €100 in 2012, to meet the commitment in the Memorandum of Understanding with the EU Commission, ECB and IMF to introduce a property tax. The household charge is a matter for the Minister for the Environment, Community and Local Government, and it is expected to raise €160 million from the charge if collected in full.