Dr. Micheál Collins:

I thank the Deputy. I will see if I can pick all of those up. I agree with what he said about the dramatic difference between the focus on direct expenditure and the focus on the hidden expenditure involved in the decision not to collect taxes. I have long been of the view that committees like this need to exist to look at those issues. It would be a significant step forward if a clear Department of Finance report and a clear Revenue Commissioners report were produced on a recurring basis so that people such as the committee members were free to ask questions about the use of those resources on behalf of those who elect them to this institution. Clearly, there are always alternatives. The Deputy's point about a hidden economy is fair, and there is certainly an opportunity to cast more light on that. I hope that opportunity is grasped.

I will address the Deputy's final point before I get to his core point. When one engages with accountants and others involved in the administration of tax expenditures, whether they are big corporate reliefs or quite small ones like film relief - in fact, film relief is too small - it is argued that we do not want to place an administrative burden on the recipients of these tax expenditures. As such, as little information as possible is collected. My personal response is to compare that to the rather extensive forms people must complete in order to get social welfare entitlements, which are much smaller amounts of money. Members such as Deputy Boyd Barrett are more than familiar with that through their constituency work. Whatever tax expenditure is at issue, there is really no reason not to collect proper and detailed information. The more information we get the better we will be able to assess their effectiveness and value for money. In that sense it is important to revisit existing tax expenditures that continue to roll on as well as thinking about new ones. As well as sunset clauses, we need to think about recurring reviews.

This committee has another clear role, which is to look at that whole topic. I mentioned issues around the stability of the taxation system in my opening comments and one would think the very short-term behaviour of the corporate sector is skewing the stability of the Irish tax system now. While that tends to give us quite positive figures in the short term, if it were to invert or reverse in whatever way, it could cause us very significant problems. It is a strategic threat to the overall budgetary structure, the structure of the taxation system, and the economy.

I am a member of the National Competitiveness Council and one of the points I make regularly to my colleagues on that council is the potential for Ireland to have a very severe paper recession where some strange set of decisions made in a corporate boardroom might have enormous knock-on ramifications for the Irish economy and all the various metrics we use for it. There is a real danger there and that whole issue is problematic.

Over the last year or so, I was quite struck in that context by the work of the Comptroller and Auditor General's office, which, for the first time since I have been looking at taxation issues in the Irish economy, got to the bottom of how much tax has been paid by corporates. It may not have been in its remit to begin to think in minute detail about the way in which corporates behave, which is a point I want to come back to. Nonetheless the office provided a very important report the year before last, comprising a chapter in its annual report, which went through the actual or the effective tax rates that corporates were paying. When we look at Irish business, which was illustrated very clearly in its report, by and large, the vast majority of firms, many of which are very small in any event, are paying in or around 12.5% tax, as one would expect, and have neither the resources nor the ability to avail of whatever evasion measures, tax management measures or whatever that are there. There is a very small number of very large corporate firms which are using the system in such a way that they pay a surprisingly low tax contribution, if any at all. In fact, some of them were paying negatively - in other words, they were getting refunds and the tax system was paying them.

I thought that was an eye-opening insight into that whole area. It shone a light on the fact that probably in corporate tax terms there is a small handful of firms which are playing the system and giving us all some quite skewed outcomes. In many cases, these are large international firms and the Deputy was right to point out that there are remarkable differences between the incomes that they initially receive and the final income that is available to be taxed. That, of course, brings us back to the very interconnected international context that these firms operate in. When one stands back from that, we would be far more upset as a country about those issues and the behaviour of those corporates if we were on the other end of the spectrum. In a sense, we are getting some unexpectedly large tax resources currently out of it. It is welcome that the Department of Finance and others have come around to acknowledge that in the last couple of months. Clearly, if we are, others are not. That has become a challenge among our European colleagues and others as well. We are, in a sensible way, moving internationally towards a restructuring of the way in which corporates are allowed to behave. To a great degree, countries and legislators write those rules and we need to know an awful lot more. If there is a hidden economy in Ireland, that is probably the big part of it with huge flows in and out of the State, often to the disadvantage not so much of us, because we seem to be getting some taxation revenue from it, but for other countries which are losing out. Whether they are developing world countries in the extreme context or some of our fellow developed world countries, maybe EU member states or fellow OECD member states, there is an issue there which I would expect will have to be resolved over the next couple of years and will probably have an impact on the level of tax revenue that we continue to collect as a country.