Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The 12.5% rate of corporation tax is the cornerstone of our corporate tax policy. It has been a key driver of inward investment since its introduction in the late 1990s. A number of studies over the past few years have proved how important the 12.5% rate is to the Irish economy. In 2014, the Department of Finance published an economic impact assessment of Ireland’s corporation tax policy. This contained the results of extensive research carried out and commissioned by the Department of Finance, which sought to quantify the effect of corporation tax policy on the Irish economy. As part of this project, the Economic and Social Research Institute, ESRI, was commissioned to carry out a study into the impact the corporation tax rate has on the decision of firms to invest in Ireland. This independent research found that if the rate had been higher over the period of the sample, the number of new foreign investments into Ireland would have been lower.

A further report by the ESRI published earlier this year again outlined the importance of the 12.5% rate in attracting inward investment. The paper demonstrated that among all European Union countries, Ireland would be the most sensitive to a change in the corporate tax rate in its ability to secure inward investment. An increase in Ireland’s statutory corporate tax rate of 1% would be associated with a reduction in its probability of being chosen as a location for inward investment projects from non-EU countries by 4.6%. The Deputy could do the maths on what the reduction would be if the 12.5% rate was to be doubled to 25%.

I remind the Deputies that although we have a low rate on trading income, a higher 25% rate already applies in respect of investment, rental and other non-trading profits and profits from certain petroleum, mining or land dealing activities. Furthermore, a rate of 33% is applied to the chargeable gains of companies. As opposed to other countries, in Ireland we have a transparent approach. Other countries may have a high headline rate of corporation tax but this is usually supplemented by a high number of tax reliefs. Our rate may be low but it applies to a broad base and therefore the overall level of corporation tax paid to the Exchequer is in line with OECD averages. Given the independent evidence that has proved the importance of the 12.5% rate to the Irish economy and the ongoing commitment to the 12.5% rate stated in the programme for a partnership Government, I do not accept the proposed amendment or the arguments advanced in support of them.

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