Mr. Sebastian Barnes:

The first thing to say is there is still much uncertainty about what will happen with corporation tax. There is both uncertainty on the policy side in terms of what will happen in the US Congress and about what the EU may do. There are ongoing discussions at the G20-OECD process and we do not know what will happen. It may be some details are very important, particularly because so much of the tax comes from a very small number of companies. Very specific things about their tax strategies may have a very big impact on the Irish economy. It is clear the risks that corporation tax will fall substantially are there and they need to be addressed. Dr. Eddie Casey might give the Deputy more detail on the analysis in the report on possible impacts. It is uncertain but it is a very likely risk and something that needs to be addressed.

On the policy side, first, we expect the economy to bounce back fairly quickly. All being well with the effectiveness of vaccination, we should be in a position where the economy is much stronger quite soon. That means we can look ahead a little bit. The public finances have become over-reliant on corporation tax. It is important to do that adjustment in a smooth way and that is what we are arguing for. The Department of Finance has put in a smooth adjustment of €500 million a year. We are saying that if corporation tax turns out to be higher than that path, particularly in the initial years - it may take a few years for these reforms to come in - that money should be saved. That partly means we will have savings on hand but it also means we will be gradually reducing the extent to which corporation tax is built into the base of the public finances. We will be reducing the extent to which we are relying on that to finance health, education and those kinds of things. We think that it is very important.

Although the Department of Finance has put in a smooth adjustment, the adjustment is probably more likely to happen in a relatively sudden way. For a few years, while discussions are ongoing, nothing may happen, and then, over the course of a year or two, we could have a big step down, which would be very disruptive. It is about gradually moving away from this. If we had the choice and could keep this money, we would, but we do not have that and we do not know at what time it will go. Therefore, we need to manage that smoothly. Dr. Casey might add a comment on the economic analysis.