Dr. Kieran McQuinn:

The point I was going make in tandem with what Professor Barrett stated about the USC and income tax is that we have been doing a body of research with the Department to look at the stability of the taxation system and the stability of the main key taxation aggregates. Some of the research arising out of that clearly points to the fact that income tax in an Irish context is a relatively stable source of tax. If one is looking at this notion of fiscal stability and the potential shocks to the economy which could accrue in the coming years, it is, quite apart from the fact of the total revenue it brings in, merely from a variance point of view clearly important that income tax would be a sizeable component of the overall tax take. This is emphasised in recent years with the substantial take in corporate tax. There was a substantial corporation tax take last year. This year the figures are still quite positive but, of course, we do not have as great an understanding of what exactly is driving that in terms of the sustainability of that receipt as we have in terms of other areas, for instance, income tax and VAT. It is another reason one must have a sizeable component coming from such aggregates in order to ensure the overall stability of the base.

As another argument in that regard, in other research we have pointed out one needs to dig beneath it as well. Income tax, VAT and stamp duty collapsed after the crisis because of the relationship between the housing market and those taxation aggregates. It is not only focusing on having income tax; it is obviously knowing the dimensions of income tax and the degree to which the tax returns in income tax and VAT are related to the different activities in the economy and how sustainable are those levels of activity.