Stephen Donnelly (Wicklow, Social Democrats) | Oireachtas source

The Minister can reply to this if he wishes. His position is well known. I know the Minister's response but I believe it is worth mentioning.

I take the Minister's point that people believed the USC was coming in as an emergency measure or to replace a number of taxes as an emergency measure. However, it is probably fair to say that was mis-sold as an emergency measure. The Minister has stated as much, and we all know, that it was brought in because other taxes collapsed, in particular, stamp duty, which will not be coming back. It was brought in to replace other tax revenues.

The USC may well have been described as an emergency measure, but it was not. The purpose was to replace an unsustainable tax, that is to say, stamp duty. This is relevant because we are talking about an amount of approximately €400 million but in fact this is part of a policy of abolition which will take approximately €4 billion from the tax base.

The Committee on Budgetary Oversight spent a good deal of time on this. We got testimony from a variety of sources, including the ESRI. The points that emerged are relevant to the USC. I will set out the context of the conversation. Public spending pressures are going to increase with demographics. We have a rapidly growing population. We have an ageing population. Therefore, public funding for public services will increase quickly. There was broad agreement, cross-party agreement, that additional money would be required for infrastructure. The point made to the committee, specifically in response to questions on whether abolishing the USC was a sensible thing to do, was that taxes are going to have to go up to maintain public services, based on demographics. Furthermore, taxes would also need to go up to deal with the infrastructure deficit. Therefore, abolishing a multi-billion euro tax was not sensible because, inevitably, it or some other tax would have to be reintroduced. I am keen to put these points to the Minister.

My next point is a political point. Obviously, the Minister has a different view. Anyway, for what it is worth, I am one of several Deputies who, during the last election, campaigned on retention, that is to say, the non-erosion of the tax base. Many Deputies in the corridors told me I was out of my mind to go into a general election campaign with a manifesto of retaining the USC. For what it is worth, I spoke to many people in Wicklow and throughout the country during the election. The majority said they were okay with retaining the USC. They realised we did not have enough teachers in our schools, that we needed more investment in infrastructure and that we needed investment in health care and so forth. They were willing to accept the retention of the USC, but they wanted to see better use of public moneys. Obviously, the Minister is free to disagree with that. My experience during the last election was that the vast majority of people to whom I spoke were okay with retaining it and did not have an issue with the fact that it may have been sold to them as an emergency tax.

I am keen to challenge the idea that the marginal rate of tax is stopping employment. For people working in Ireland, that is not true. For it to be true, we would have to believe that there are people sitting on social welfare who could be earning €50,000 if they chose to do so. I am using that amount because a taxpayer has to be earning over the marginal rate at some decent amount in order for the marginal rate to matter. For the assertion to be true, we would have to believe there is a large cohort of people in Ireland who are choosing not to work. Moreover, for the idea to hold these people would have to be watching the marginal tax rate and reasoning that if it drops from 50% to 48%, or whatever the rate is, then they would go back to work. I do not think that stacks up. I do not think such people exist.

The second explanation was that there are people abroad who have emigrated from Ireland and who want to come back, but who are not coming back because of the high marginal tax rate. A serious example would include clinicians, nurses and doctors.

Ireland is, per capita, the highest exporter and the highest importer of doctors in the world and clearly something is going wrong. If one talks to Irish doctors working in the US, Australia or the UK, they do not mention the marginal tax rate, they refer to working conditions. It is the same with nurses and teachers - they talk about working conditions. Similarly, in my experience of living abroad and of working with many people who work all over the world, never once did I hear anybody in a discussion on moving to Ireland, America, Sweden, the Cayman Islands or wherever say that any part of his or her consideration was driven by whatever was the marginal tax rate in the given country.

Deputy Pearse Doherty has asked for data and I have asked for it too. I have heard it asserted on many occasions and I have heard the Minister mention the Laffer curve as the theoretical underpinning of it. However, does the Minister have any data to back it up? In my experience, it simply is not the case that if we move the marginal tax rate from 50% to even 45%, Irish lawyers, doctors, nurses, teachers or whoever would suddenly return to this country. That is the final point I wish to make.