Ms Olivia Buckley:

I will share that time with my colleague, Ms Cora O'Brien, if that is okay. I thank the Chairman and members for the invitation to appear before the committee and the opportunity to outline our views on a future tax strategy for the Irish indigenous sector aimed at strengthening and growing the country's tax base while building resilience into our economic model. There are important factors against which we present this proposal: an increasing demand for expenditure on services to meet the needs of an expanding and ageing population; external political and economic risks that could impact Ireland's small economy, as highlighted by many international bodies as well as the Departments of Finance and the Taoiseach in their national risk assessment report; a highly concentrated tax base with very little buffering in the face of any unforeseen global or domestic disruptions; and a significant reliance on foreign-owned multinationals.

Foreign-owned multinationals account for 80% of Ireland's corporate tax base, and US multinationals account for 70% of employment in IDA-supported companies. The foreign-dominated pharmaceutical sector on its own accounts for almost 40% of the value of manufacturing production in Ireland. We have an Irish economy that is approximately one third smaller when the main effects of multinational activity are removed, using the new GNI* economic measurement as opposed to GDP. Our debt ratio, using the GNI* measurement, is the fourth highest in the OECD, according to the Irish Fiscal Advisory Council last week.

To deal with this backdrop of risks and vulnerabilities we need a diversified and resilient tax base that is capable of withstanding shocks. However, our current base has become increasingly reliant on taxes on labour and on corporation tax paid by foreign multinationals, as the committee can see in the diagram we have provided. Several international bodies have highlighted these dependencies to us. The European Commission country report on Ireland this year said, "The stability of tax revenues in the medium term is a concern for public finances ... [T]he increasing reliance on buoyant corporate tax receipts to finance permanent increases in current expenditure is a concern." It stressed that "Ireland is a small and ... open economy [and] its public finances remain vulnerable to external shocks and changes in economic outlook". The IMF has also been instructive regarding what Ireland must do. It recommends that our policies focus on rebuilding fiscal buffers and strengthening resilience. It said measures to strengthen human capital and reinforce competitiveness, particularly for domestic enterprises, are key to supporting sustained growth and reducing regional disparities.

While Ireland cannot control external shocks, what it can control, it must. The Government's report on Irish trade, Ireland Connected, stresses that the key to sustaining jobs and incomes is Ireland's ability to succeed in international markets. Our national plans have placed a firm focus on exports as key to our economic growth. New EU free trade agreements, an expanding eurozone economy and rapid growth in services as a share of world trade represent real opportunities for Ireland. However, we need tax policy and tax administration changes if we are to realise the plan. While Ireland's exporting story has been one of success, there is an acceptance that it is highly dependent on exports from foreign companies and that our indigenous export model is skewed in many respects. Although there are "superstar" Irish performers that are globally focused, Irish manufacturing companies remain narrowly concentrated.

In parallel with our high-performing FDI sector, Ireland now needs an innovative, export-led indigenous sector. We rightly have a comprehensive roadmap for FDI. However, a detailed and long-term roadmap is also urgently needed for the indigenous sector.

The thorough and strategic approach that we have adopted on FDI must be applied for the benefit of Irish indigenous companies and entrepreneurs if we are not just to protect our tax base but to grow it.