Mr. Michael Taft:

The problem is that during the past ten or 15 years, if anything, the pressure on corporate tax rates has been downwards in terms of providing reliefs and allowances for that tax competitiveness. The Deputy will not be able to find any examples of countries that increased their tax rates only to experience a loss of business. In other words, would companies move their operations if we increased our corporate tax rate from 12.5% to 15%? That is something one cannot test until one does it. The nominal tax rate for most multinationals prior to the merging of the two rates - we used to have the 40% rate and a 10% rate for manufacturing tax relief - was 10%, and that increased to 12.5%, but the increase did not have any negative impact. An alternative system - this is something to be examined and from which we should not shy away - could be to increase the nominal rate and through a series of reliefs, allowances and rewards for investments to target those sectors that our indigenous sector would find difficult to generate - capital-intensive sectors such as the chemical and pharmaceutical sectors or other key global network sectors. That would be possible. In other words, there are more ways to use the tax system rather than just through the rate. We have a whole array of instruments at our disposal. We could increase the nominal tax rate and still have particular reliefs. If we look back on the beginnings of the Celtic tiger boom in the 1990s - what is always considered the good phase - one will see that we used to have two rates, a 40% tax rate, essentially for domestic companies, and a 10% rate, or in some cases a 0% rate, for multinationals. It did not stop new start-up companies in the domestic sector from generating business - those at the 40% tax rate - or from increasing economic activity during that period. They were then brought together because there was an EU requirement for us to have one single rate. In one sense, by using a nominal rate with an array of very targeted instruments in the key sectors, we could maintain and possibly even boost investment where we wanted to while still yielding higher tax revenues without any loss.