Dr. Martina Lawless:

We do not have any explicit analysis or forecast in respect of how tax changes under the base erosion and profit shifting, BEPS, process might affect Government revenues here. Much will depend on how individual companies reorganise their tax affairs in response to changes in the rules. This is difficult to foresee. The initial BEPS round, which was widely forecast would have negative impacts on the number of foreign multinationals using Ireland as a base, had quite the opposite effect. Companies reorganised in line with their substantive activities. This moved more resources to Ireland and is probably one of the reasons for the significant increase we have seen in corporate taxes, particularly in 2015. It is very difficult to know in advance until the precise detail of the tax changes and the behavioural response of individual companies become known.

One of the risks we continually highlight in our corporate tax analysis is not only the share of income that Ireland raises from corporate taxes but also how concentrated it is in a very small number of companies. That raises significant risk exposure. Decisions by individual companies on their global structures can have either extremely positive or negative impacts on the amount of corporate tax revenue raised in Ireland. It is one of the reasons we are always cautious about the possible transience of corporate tax revenues and the need to be prudent with regard to how much permanent expenditure is done on that basis.

This revenue has been temporary for four or five years but we could continue to collect it for a relatively long time. Obviously, we will always welcome additional tax revenue. What we are cautious about is translating that tax revenue, which could be temporary, into permanent public spending increases. Translating it into paying down the high national debt would have more positive long-term impacts than embedding it in permanent expenditures. If there is a big downturn in the economy, having a lower opening debt stock would put us in a stronger position with the financial markets if we needed to borrow later.