Oireachtas Joint and Select Committees
Wednesday, 4 December 2019
Committee on Budgetary Oversight
Fiscal Assessment Report: Irish Fiscal Advisory Council
I welcome the report which is really useful for us. No one can say they have not been adequately warned about the risk of relying on corporation tax to fund spending increases. We were reminded again this week that corporation tax receipts are well ahead of expectations by more than €700 million for November alone. While the windfall is very welcome, the Government's reckless use of windfall income demands consideration, as IFAC has outlined. Overruns are draining resources that could and should be used for the provision of vital services, meeting the demand of our healthcare services to providing social and affordable housing.
The Government, however, is characterised by its putting waste over spending and the misuse of these receipts. That the receipts are under threat in turn poses a great risk to our capital projects.
I have a number of questions so I hope the witnesses might be able to provide us with some insight today into the risks posed by changing the national corporation tax regime. In the next few years, changes will take place to how and where corporation tax receipts are paid as a result of the OECD-BEPS initiative. The representatives have rightly highlighted this risk. While the aim is to clamp down on tax avoidance, it will probably negatively affect our corporation tax receipts. I would like the delegates to expand on this and give their thoughts on potential BEPS reform. What will it mean in practice? How will it affect revenue for the State? Do the delegates have any ideas on how we can replace the lost revenue to keep our public expenditure at a sustainable level without proceeding to austerity? It was reported this week that a surge in stamp duty from house sales will offset this risk. Does the council have a view on that policy? Could the delegates remind us how a surge in stamp duty to fund spending worked out the last time? What case is there for using what are effectively windfall increases in corporation taxes to fund capital expenditure on a once-off basis? Is that more sensible than plugging holes each year, thereby adding the expenditure to the base for the following year?
What is the view of the council on the likelihood of a no-deal Brexit at this point? If the danger of a no-deal Brexit receded, what difference would it make to the council's general advice on how to approach the budget in the coming years? We can discuss how expenditure is accelerating. Does the council have a view on whether the issue is overspending or under-budgeting? If overspending happens, as it does every year, is it surely not more logical to say we are being dishonest and under-budgeting in health, for example, rather than overspending? We need to sort that out over the next couple of years. We cannot keep going on pretending the budget is a certain amount while knowing expenditure will always be more.
On the issue of spending being at its maximum, or beyond, are we really not talking about an imbalance? Spending could be perfectly sustainable but the revenues do not match or are temporary. If revenue streams were to increase through taxes on wealth, for example, would spending not be sustainable if matched by revenue?
I wish to finish up on the issue of transparency or the lack of it in respect of local government and housing bodies. Could the delegates expand on the problems they see and what should be done about them?