Professor Michael McMahon:

It is 27% now. The normal rate for most OECD economies is somewhere around 8%. A lot of corporate tax is paid in Ireland. Regarding our estimates, and they are estimates and there is a range of these, in that increase, we would say that somewhere around €9 billion or €10 billion of that last year was what we would call the excess. When we talk about the excess, it is not necessarily what would disappear in a recessionary situation, a tech downturn or an issue relating to the pharmaceutical sector. This is what we think are the worldwide activities-related multinational tax that could disappear with the changes in the international tax environment and changes in their own decisions as individual corporations about where they want to locate things like intellectual property. The counter to that is that of that increase, from €4.6 billion to €12.1 billion is what we would think of as normal corporate tax that we would put into the Government funds as other taxes that are there to be spent.

The point we were trying to make about the cyclical exposure is not something that is taken fully into account in this excess. There is still this concentration risk. It could be a specific sector or a more general global downturn that would see not just all corporate taxes fall but also have a knock-on effect on these high-value added jobs, which could disappear along with the income tax that would go with that. That is worth separating.

The reason we tend to focus on what to do with this excess corporate tax is because there is great uncertainty about it. I would love to sit here and tell the committee that we know the playbook and the dynamics and that it will disappear on a certain date or stay at a certain amount, but we do not know. It could be more next year and then disappear. It could stay relatively elevated for a few more years after that. We presented a range of estimates precisely because there is a lot of uncertainty around that.

The second cyclical point is that you do not want to take all of that €12.1 billion last year and think it is going to be here forever because that is susceptible to a cyclical downturn.