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

I thank Deputies for their contributions. Certainly, high marginal tax rates have an effect on employment. If one taxes something, one tends to get less of it, and if one reduces taxes on something, one tends to get more of it.

We tax tobacco products because we want people to smoke less. We tax alcohol because we want people to be more moderate in their use of alcohol. If one puts penal taxes on employment, I cannot see why there would be any other economic effect than one gets less of it. Once the marginal tax rate goes over 50%, it begins to affect employment levels, it begins to affect the propensity of emigrants to return home to Ireland etc. We have recited all these arguments previously.

I do not seen much difference between bringing down income tax rates and removing USC. This is the third year that we have made some reductions in USC. I started there because USC was brought in as an emergency tax to top up the take from personal taxes during the crisis and, because it was the "last in" as an emergency tax, it should be the "first out" in terms of reductions.

Of course, the Deputies are quite correct. This is a very small reduction because we did not have many resources on this occasion. The resources we had available on budget day were used by and large to improve public services by increasing the budgets and the allocations for the public services with which the Deputies are all familiar.

Deputy Michael McGrath is correct that the cost of these measures are €379 million in the first year and €462 million in a full year. Non-indexation accounts for €345 million on the first year and €400 million on a full-year basis. There is a match between the two on this occasion.

It is the third year of reductions and we would hope that there will be further reductions in future years. In addition, I have always said that the Government's plan to continue to phase out USC will be dependent on having the necessary fiscal resources. We have them this year and I hope we will have them next year.

Deputy D'Arcy is correct. Income tax and USC are expected to raise over €20 billion in 2017, that is, following the impact of these changes, from the position of €13 million in the year that he referenced. It is quite a big tax take.

On the issue of the over-dependence on corporation tax, once we introduced the changes in our corporation tax regime in the Finance Bills in 2013 and 2014, there has been a step change. The Revenue is of a different view now. Last year, the advice from Revenue was that a portion of the corporation tax take was once off and possibly transitory. It is of the view now that it is a new base and that we will continue to enjoy this flow of corporation tax in future years.

The base is broadening and some of the additional tax is from smaller companies paying corporation tax because their trading position has been quite good in recent years and profits have been quite good. Of course, the international changes in corporation taxes have enhanced the tax take in Ireland. We have to be cautious of any particular tax. We have to react if there are any signs of fragility in any particular major tax but so far there is not such a sign of fragility.

On the impact of whatever changes might be made in the United States, we will have to wait and see. I have spent all my life listening to United States election campaigns where there was a commitment always to reform corporation tax and I have yet to see tangible measures. It has been so dating back as long as I have been in politics, and I was first elected to a local authority in 1974. It goes back a bit.

If one looks at the commitment President-elect Trump has made to reduce corporation tax to 15% from the 35% on average that is now applied in the United States and how that might impact on the multinational sector, the repatriation of profits is the primary issue with foreign direct investment in Ireland or elsewhere in the world or elsewhere in Europe or in the UK. At present, the disincentive is that in setting up overseas, if one repatriates profits one pays 35%. If one reduces that to 15%, it seems that is not a disincentive for setting up abroad. As a matter of fact, it could work the other way because one would pay much less tax if one repatriates profits from Ireland in the future. We will see. I do not know what the particular mix is. US corporate tax, like a lot of corporate tax codes, is quite complex and when one looks at the various legitimate reductions that can be made, it becomes even more complex. Then they have special zones as well where different tax regimes apply.

We will have to wait and see. The Revenue will constantly evaluate these matters. So far, there seems to be no great anxiety among foreign direct investors here from the United States and IDA Ireland states the pipeline is extremely strong at present.