Dr. Tom Healy:

The Senator mentioned the economic survey of Ireland by the OECD. I have not had an opportunity to examine it yet. We met with its representatives. It is not surprising that various international organisations, including the OECD, have tended to endorse the approach of fiscal austerity and generally have not endorsed any easing up. There is not enough time to go into the detail of that. The IMF has endorsed it more recently even though some of its own research indicates serious questions about the efficacy of fiscal austerity in a number of European countries. The Senator raised a very good question that needs to be highlighted here. We cannot bridge the gap between a position that says we can have no further tax increases in this country and one that says we can have no further cuts in public expenditure. It is not as simple as that, but it is almost as simple as that. It comes down to a fundamental choice even when, hopefully, we gradually recover from this recession over the next few years. Unfortunately, it will take some time. We will still be faced with those fundamental choices in terms of the balance of public spending and the composition of revenue and how we will fund public services, particularly for young people and an aging population.

I will provide some concrete figures, although I will not take up undue time. In respect of what the Government is proposing, Senator Hayden wondered about taking the pain up-front and then easing off next year. If the Government goes ahead with the full consolidation - we are talking about €1.9 billion on current spending, of which probably about €1.6 billion is on non-pay current spending - that is about 4% of total current expenditure across the whole of Government. If the Government chooses to go ahead with that scale of adjustment in expenditure, inevitably there will be very significant cuts in social welfare, health and education. In the latter two cases, they will be on the non-pay side, bearing in mind that the education budget is 20% non-pay while health is about 30% non-pay. That raises very serious questions about the quality of public services, so there are no easy choices. It brings us back to a consideration of the options for taxation, particularly in respect of wealthy and high-income households and corporations.

I will now turn to some questions raised by Deputy Boyd Barrett. In this particular proposal, we were very cautious and conservative in respect of wealth tax estimates, deliberately so because there is a view out there that a wealth tax would not be worth doing, administration costs would be high, there is not that much wealth in the country and not much money was collected when it was last done in the 1970s. I understand Dr. Tom McDonnell spoke here yesterday morning. Together with TASC, we will publish a significant report on the distribution of wealth and its taxation later this month. It will review all the different options in respect of tax rates and thresholds and the very limited knowledge we have about the distribution of wealth in this country. We think about €150 million is the lower-bound estimate of a much wider range which could go as high as half a billion euro. In this case, we have definitely erred on the side of caution.

Similarly, without any change to the headline rate of corporation tax of 12.5%, I estimate that the effective rate is probably about half that. We know we collect about €3.5 billion in corporation tax each year. According to the latest CSO figures, total profitability in the corporate sector is about €46 billion, so that gives one an average effective rate of about 7% to 8% maximum. It could be a bit lower than that, depending on how profits are measured. We propose a very modest increase of a fraction of 1% - approximately €250 million - through a tightening of reliefs for corporate tax or an insistence on a minimum effective payable rate by corporations. For example, every corporation could be required to pay 1% of its corporate profits. Obviously, we do not know the distribution of profits and the profitability of any individual enterprise but I suspect €250 million may be small change in the pockets of one corporation. These are choices and when one puts it in the context of the human stories, concerns about inequality, the way this is affecting families and communities and the data I have cited on public expenditure, we are talking about marginal changes in respect of revenue that do not necessarily have any damaging economic and social effects, but would redress some of the sense of inequality and unfairness that is there in respect of five years of fiscal adjustment. I hope I have answered those questions as best I can in the time available.