Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

On the USC and the views expressed by the many distinguished witnesses who have appeared before the committee, their opinions should be valued, as I am sure they are. There are other opinions as well. The opinions of the political parties during the election were to the effect that the USC needed to be reduced, that it was an emergency tax introduced at a particular time and that now that the emergency was over, work should continue to phase it out. Whatever we do in this regard in the upcoming budget is not a first step because reductions in the USC were provided for in the previous two budgets. Deputy Cullinane will recall that during the election time his party was the only party that was committed to maintaining the USC. The Fine Gael, Fianna Fáil and Labour Party proposals, which were varied but bore a lot of similarities as well, were around the phasing out of the USC. These were reflected in the programme for Government such that I am not constructing a budget a couple of weeks from a standing start. The budget will be based on the programme for Government, which sets down the intent of those who adhere to it in respect of USC.

On the phasing out of the USC, we are in the third year of reducing it. We have committed to anything we do being directed towards reducing the impact on low and middle income earners and continuing that process in subsequent budgets if the Government is still in office. The reason I reference a period of three years is the commitment given by Fianna Fáil to support the Government over three budgets and then review the position. I am saying it will not be possible to phase out the USC completely in a three-budget cycle, but it should be possible to phase it out in a five-budget cycle, understanding that after the fifth budget, because of the way in which the tax years are structured, there would still be a tail heading into 2021 which would be eliminated in the course of that year.

On corporation tax receipts, the question on which was addressed specifically to the Revenue officials, there was a spike and at the time nobody could explain why it had occurred. There are now better explanations, one of which is the corporate sector is more profitable. As long as it sustains profitability, there will be a strong flow. The fear expressed last year, that one should not rely too much on them because it might be a one-year spike, has ameliorated somewhat. It now looks as if corporation tax receipts - there was a 40% jump in the yield - will flow in at a much higher rate than heretofore for a variety of reasons, one being the profitability of companies. That is not to suggest the yield will not rise and fall with the business cycle and the profitability of companies. It should be remembered that corporation tax receipts account for about 15% of total revenue, which is very significant. We are not, by and large, funding through corporation tax receipts. There is a serious flow of funds, but they are nothing like income tax or VAT receipts. What I am saying is people should not be fascinated by corporation tax receipts.