Dr. Tom McDonnell:

When an economy is potentially on the verge of overheating, the economic literature suggests the last thing to be done is to cut taxes. All that does is stimulate the economy even more. In any event other than an absolutely disastrous Brexit, one would not consider tax cuts of any kind under those circumstances. The implicit tax rate, or the amount of tax revenue over the tax base, on labour is higher in the European Union average than it is in Ireland.

It is 36.1% there and 32.7% here. We would have to increase labour taxes, which include PRSI, by about 10% just to get up to the EU average. On the higher rate, what actually matters is the effective rate and the amount of tax someone actually pays. A single earner or a couple with one income and two children on the average wage pay much lower amounts of tax in Ireland than they do in the northern and western European peer countries we talked about. One of the reasons is that they have to pay for so many things in Ireland, such as childcare and healthcare in some cases, when it is private. It is not good policy in the long run. On the consequences of our lower levels of taxation, my colleague and I looked at per capita revenue in Ireland relative to the other rich countries of Europe and we were the second lowest in aggregate receipts. The per capita gap was €1,256 less revenue per person which implied a scale gap of €6 billion over the economy. The idea that we are overtaxed is just factually incorrect. People think they are overtaxed because things are more expensive in Ireland. We have a cost of living crisis, not an overtaxation problem. As it turns out, most of the difference is on the employer PRSI side, which brings us to issues about social wage. The consequence of all this is that in 2018, looking at those ten countries, our per capita spending excluding interest was €15,791 per person, which was the second lowest of all those countries. We would have to increase public spending by 10% just to get up to the average, so no, I do not think this is the right time to cut taxes.

On minimum effective tax rates, there is a social contract. Everyone should pay a minimum effective rate. The difficulty in getting minimum effective tax rates for corporations is that they are not consolidated in terms of tax law in the way an individual is. Until we have a common consolidated corporate tax base across the EU, for example, it will be very difficult even to establish what that effective rate would be. What is "the company" when there are all these subsidiaries? It might pay a very low effective rate in Ireland or a higher one in a different country. They are engaging in tax games to minimise the burden overall. The point of a consolidated base is to deal with that. Finally, I do not believe the optics on the political landscape would be at all positive from removing pay caps for bankers.