Mr. Seamus Coffey:

Some of the other points the Deputy raised were covered in earlier rounds but I would like to focus on some of the questions he asked on corporation tax and assessment of the risks posed by some of the international changes. This is not something that has been formally assessed by the Irish Fiscal Advisory Council but I will give my personal views on the risks and what they might entail. When we look at risk, we primarily look at forecasts or projections. These go in both directions. It could be the case that these changes are positive and result in increases, or it could go in the other direction. To highlight that, we could go back to 2012 and 2013 when the OECD first started the base erosion and profit shifting, BEPS, process. Various Oireachtas committees identified these changes as significant risks to Ireland but they have actually contributed to the increases in corporation tax we have seen in recent years. An underlying principle of the OECD's project has been to align profit with substance. Many of these American companies have significant substance in Ireland and we are seeing greater profit being allocated to that substance resulting in greater receipts for Ireland.

The BEPS project has moved on. We are now on BEPS 2.0. One of the principles of BEPS 2.0 is to assign more of the taxing rights to the market countries. Profits are allocated less to production and some of the other activities to which they have traditionally been allocated and more to the countries in which the customers reside, particularly in the digital sphere. More money going to the market countries could present a downside risk to Ireland. There is also a proposal for a minimum effective tax rate. The impact of such a measure on Ireland is unclear. If it is a global minimum across corporate groups, the outcome for Ireland could be relatively benign. If it were to be applied on a country-by-country basis, the outcome may be different.

The issue we are highlighting is that there are significant risks and uncertainty with regard to corporation tax. The Deputy asked whether we could replace the lost revenue if these risks have negative outcomes. We believe that we should not need to replace it all, to follow on from Deputy Lahart's questioning. We should avoid being in a position in which important key public services on which people rely are provided on the basis of potentially volatile revenue sources. They should be on a sustainable footing. We believe that more could have been done over recent years to achieve that. For example, the Government set out a plan for this budget to increase net policy spending next year by approximately 3%. We said that the Government should adhere to that plan. We did not ask for anything additional, only that the Government deliver on the plan it set out. One reason for adhering to that 3% is that doing so would have offset some of the more rapid increases in spending that have happened in recent years which have been masked by those corporation tax receipts. The Government delivered a plan of 4.5% however. This could be considered sustainable but it does not correct some of the reliance on corporation tax we have built up over recent years.

We see significant risks. The money continues to come in. We saw it yesterday. The risks could result in positive or negative outcomes but we are highlighting the uncertainty, the concentration and the potential unreliability of corporation tax as a revenue source.