Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

The Minister mentioned that high marginal tax rates have an affect on employment yet there is no data to suggest that is the case. Indeed, the ESRI, which, I am sure the Minister will acknowledge, is a reputable body and does not have a political axe to grind, has stated before the Committee on Budgetary Oversight that this notion should be tested and made a follow-up point that sufficient investment in child care would have a bigger affect on employment than reducing marginal tax rates. This is what frustrates me. The Minister can make statements as if they are true to suit the narrative that he wants to peddle at any point in time but he must test that and tell me, if he does not mind, why the ESRI is wrong in its view that this notion needs to be tested. The ESRI is not saying the Minister is correct in this regard. This is, in my view, a narrative that has been created by Government, and, indeed, by some parties in opposition, to suit their agenda of reducing the tax base in terms of direct income tax.

When the Minister talks about reducing the USC, we know the effect of that. We know who benefits most from such chipping away, whether it is the Minister's policy, Fianna Fáil's policy or the Labour Party's policy. The way to do this, obviously, is to give a bit now and a bit there. One does not see the quantum of it but after a couple of years it is no longer €400 million but a couple of billion euro that the Minister has stripped away from the tax base. We can see from the Department of Finance's paper presented to the Minister that it will narrow the tax base, that it will be regressive, that it will have limited benefits and that those who will benefit the most are those with the highest incomes.

The Minister also makes comments repeatedly. The Minister will not address the fact that he has made different comments to suit other narratives in the past. He states that this is an emergency tax. He tells us again today that it is an emergency tax. Then why did the Minister mislead the House on previous occasions when he stated that this was never introduced as an emergency tax? The Minister is on the record of the House as saying that. The Minister said that at a time when he believed that the USC should not be reduced. The Minister has completely flip-flopped and now he says that this is an emergency tax, but he will not deal with the facts of this here, which is that this measure which, as I said, brings in €4 billion now and which will bring in €5.6 billion each year by 2021, replaced two other taxes.

The rationale behind the introduction of this tax at the time by the late Brian Lenihan was twofold. First, it was to capture those on very low incomes. He genuinely believed in the principle that regardless of one's income one should pay some amount of tax despite the fact, we would argue, that they do pay some amount of tax through indirect taxation in VAT etc. However, that was the late Brian Lenihan's notion at that time and that is why he introduced it at a level of €4,004.

The second part of the rationale behind the introduction of the USC, which led to the progressivity of the USC, is that it captured all incomes.

There was no way of sheltering income from the USC. That is why the wealthiest in society like the idea of getting rid of the USC because it was a vehicle where they actually got taxed on their income regardless of where it was and they had no ability to write that income down through different tax expenditures. That is where the USC was very progressive and why we should hold onto a part of it.

The Minister creates a narrative to suit his own agenda. He told the Seanad and it is on the record that this was never introduced as emergency tax. Can he tell me now, if we are to take his word today that it is an emergency tax, why he misled the Seanad at that point in time? Can he tell me why his view of the ESRI statement made to the budgetary committee is that high marginal taxes have an impact on employment? The arguments he is putting forward today could have been played in an episode of "Reeling in the Years". They are the exact same arguments that Charlie McCreevy put forward - they are taken completely from his script. At that time, I am sure the Minister for Finance believed that was the right thing to do. Unfortunately, history has told us, and our recent past has told us, that it was the wrong thing to do. With the benefit of hindsight, we know it was wrong.

Fianna Fáil rightly points out that taxation levels at a certain point were 30% of overall tax and are now 40%. It wants to hark back to the time of McCreevy and forget that the time of McCreevy bust the bloody country. We had a major fiscal deficit outside of the banking deficit and outside the fact that billions of euro from the National Pensions Reserve Fund were pumped in to rescue banks. There was a major hole in our public finances because of the unsustainability of our tax base.

Regardless of what Donald Trump, the US Congress or the US Senate do in the future, and whether they do anything with corporation tax, we need to be conscious of something, namely, at this time, 40% of our corporation tax is paid by ten companies. In 2009 21% was paid by ten companies but by 2015 this had become 40%. We have seen a dramatic increase in concentration in corporation tax receipts. For any Minister for Finance, that should be a warning shot across the bow. Please God they do not leave, and please God some other country does not decide to engage in a race to the bottom and draw these companies out of our country. However, we need to be conscious there is a risk. The point I am making is that those ten companies make up the same amount of tax revenue as stamp duty did at the height of the boom. If this goes belly up, we will be asked time and again by people in the media and elsewhere why we did not see the warning signals. We saw this with the financial crash in the past, where we had a concentration of tax receipts from what was potentially an unsustainable source. We have the same thing at this time. When 7% of the overall tax base is located in ten companies, that is a warning shot.

The presentation that is being provided by Government and Fianna Fáil is that this is minor. It is minor in terms of the benefit that people will receive, which will mean a couple of euro extra in their pocket. However, in terms of the overall figures, the Minister referred to over €440 million per year that will be stripped out of the tax base. Yet, we will hear week after week, month after month, over the next year that we do not have enough money to pay for additional consultants or nurses to deal with the fact we have more than 400 people on hospital trolleys. The Minister will tell us he does not have the extra few euro to pay our teachers for the supervision of our children in secondary level schools-----