Mr. Seamus Coffey:

From our perspective, we can take a second view and look at the economy. Our corporation tax receipts are a bit odd when it comes to taxes. From an economic perspective, we generally consider taxes to be a withdrawal from the economy. The Government is collecting income tax from workers or collecting VAT and excise duty from transactions and is taking money out of the circular flow. However, our corporation tax is coming from within a small group of very large US companies. They are paying that to the Irish Exchequer from customers and their trade abroad. They are not here to service the domestic market. They are here to service international markets and we are getting 12.5% off the top of the huge trade that those companies are doing. If that money is then spent into the economy, that is like an injection. It did not come out of the economy first; it came from these companies and now we are spending it in the economy.

One issue is the sustainability of it. We have income supports, education and health services and a whole range of important stuff that the Government does. We have seen in Ireland two very painful episodes where very painful cutbacks were introduced in the 1980s and post 2008 because services and supports were funded on the basis of unsustainable tax revenues. If we want to expand and increase Government services, we should do so on a sustainable basis, not on the basis of what seem to be huge tax revenues but may not be permanent in nature.

We would recommend running surpluses, which we are doing, although they may not be sufficiently large because of the underlying structural deficit that we referenced earlier. If we want to do more things, maybe we have to make choices about raising additional tax revenue. It seems very perverse to say we should be increasing taxes in certain areas when tax revenues are pouring in, but if we look back to the period post 2008 and the services and supports that the Government is offering now, would we be in a better position if we had funded those from tax increases in 2005, 2006 and 2007 or funded them from stamp duty, which disappeared?