Professor Alan Barrett:

I will make one more point on corporation tax with regard to something that makes it very hard to analyse. One can perform an analysis of most taxes to determine what might be the effect as the tax goes up or down. However, when it comes to Ireland's corporation tax rate, there is an argument that the certainty around the rate is something that always is sold. It is not really a question of moving the rate from 12.5% up to 15% and that this would be okay. The argument is that once one breaches this absolute commitment that it will remain the same forever, one may have created a worry in people's minds and may have lost the real value. Consequently, while increasing the rate by a couple of percentage points may seem like a small thing to do, one would be breaching a fundamental principle that appears to have continued for a long time. In a sense, as a group of economists, we cannot predict what the reaction might be to something such as this. While it is an experiment one might want to conduct, it could be a very costly one.