Mr. Sebastian Barnes:

The Deputy asked three questions about credibility, the impact of corporation tax and a wealth tax. I will leave the second question to Dr. King and we will come to it last. On credibility and the SPU forecast, it is welcome the Department has returned to doing medium-term forecasts that are four years ahead. Although, ideally, they should be five years ahead, it is the first time in more than a year the Department has done that and it is very helpful. It is helpful to everyone, including us, to be able to understand what it is doing.

However, as the Deputy said, we have concerns the forecasts are poorly founded. On the economic side, we endorse these forecasts. Our view is a little more optimistic but these are reasonable macroeconomic forecasts and we have endorsed them. It is not a problem on that level. The issue is much more on the public finance side. There are two problems. One is that even conditional on the existing policies on which the forecasts have been done they are not well-founded, as we have discussed. There are a number of issues.

Among those, we have a concern about incoherences between the Department of Finance and the Department of Public Expenditure and Reform and a lack of costings, particularly on the spending side, which is more in the Department of Public Expenditure and Reform's remit than that of the Department of Finance. The political questions also need to be resolved, but those are matters for the Government, not officials.

Overall, the budgetary forecast is not credible. We have produced an adjusted version because the adjusted numbers are probably the ones that people can use. They are useful on two bases. First, they are more realistic and seem to be more correct. Second, they provide better guidance because they are built up in the right way, allowing someone to understand what the various moving parts are and to come up with a different set of numbers if he or she takes a different view. It is difficult to do that with the Department of Finance's numbers in the stability programme update because many aspects of those are unsatisfactory.

It is for the European Commission to decide, but there is not really a process through which it can revert with criticisms. Importantly, we have an endorsement role on the macroeconomic side, in that we endorse macroeconomic forecasts before they are sent to the EU. The EU requires them to be endorsed. If we do not, the EU would have no forecasts from Ireland to examine. The situation on the budget side is different, in that there is no endorsement function. Although we are providing an assessment, it is not in any way binding and does not affect the way the European Commission will consider the matter. It is important to understand this difference on the institutional side.

The council's mandate is not to examine specific tax or policy measures. As such, we do not have a view on a wealth tax. As we have discussed at previous hearings, there are many forms of wealth tax and they may have different implications. More generally, we welcome the creation of the Commission on Taxation and Welfare. Taking a rigorous look at these issues is a good idea and could contribute to developing a good strategy. It is important that, when bodies like that or the Pensions Commission report, it leads to change and is not just an exercise in kicking matters into the long grass.

I will ask Dr. Bergin to contribute on the impacts of corporation tax.