Thursday, 14 February 2019
Ceisteanna - Questions - Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions
3. To ask the Minister for Finance if an independent assessment will be commissioned on the sustainability of Ireland's corporation tax receipts for the period 2020 to 2030, inclusive, in view of the rapid growth in corporation tax receipts and the concentration of those receipts; and if he will make a statement on the matter. [7512/19]
This question asks the Minister to commission a new independent assessment of the sustainability of Ireland's corporation tax receipts. As he well knows, we have had a boom in corporation tax receipts in recent years, but there are very serious questions about the sustainability of those receipts as part of the public finances at this time. I will come back in a moment and speak about the Coffey report of a number of years ago. This is a very direct question. We need to now carry out a new independent assessment to see how secure and stable this vitally important stream of revenue is.
There has been a very significant increase in our corporation tax receipts. This is an area on which there will be growing focus in the next few years because of change that is very likely in the global tax landscape.
Whether it be the work that is taking place in the OECD or changes that we may see as a result of global trade, it will be increasingly important that we form a new view regarding the sustainability of the receipts into the medium term.
On the direct question put by the Deputy, I want to find a way by which we can form a new view relating to the sustainability of these receipts. I need to reflect on how we can do this given the role of the Irish Fiscal Advisory Council and the work done by Mr. Seamus Coffey on this area. I am working on the best way to achieve sustainability in receipts and would welcome the Deputy's views.
It is important to look at what exactly Mr. Coffey said in his report in mid-2017, namely that “although it is impossible to be definitive, and the volatility in receipts will remain, the level-shift increase in Corporation Tax receipts seen in 2015 can be expected to be sustainable over the medium term to 2020.”
In 2015 we collected €6.9 billion in corporation tax receipts, an increase of over €2 billion on the previous year. Since then, the figure has risen to €10.4 billion, therefore receipts have increased by 50% since 2015. Last year we collected 22% more than anticipated, which was nearly €2 billion more than we expected. Receipts were €2.2 billion or 27% more than the previous year. The scale of increase since 2015 is quite spectacular. There must be caveats on any assessment - there will be assumptions, it is difficult to forecast this revenue stream - but there is now a key risk for the public finances in making permanent expenditure commitments on the back of what could prove to be a transitory, volatile and temporary tax receipt.
Mr. Coffey made his comments after a shift in corporation tax yield. As the Deputy will know well, between 2012 and 2014 corporation tax receipts came in at about €4 billion to €4.5 billion. Between 2015 and 2016 they moved between €6.8 billion and €7.3 billion. Across that two year period, there was a structural change in the level of corporation tax receipts. Mr. Coffey formed his views in the aftermath of that shift in tax yield.
To be fair, Deputy Michael McGrath and his party abstained on this unlike other parties which favour broadening the base in abstract but oppose every measure relating to how we do so. That is why we made a change in the VAT rate in the hospitality service sector. It is why we made the changes in stamp duty on commercial property. I am aware of this risk but as I have told the Deputy on other occasions, I have yet to face any Deputy in this House who argues that I should spend less. It is my job to manage that balance. I am aware of the risk and will figure out if there is a way by which we can address the need for the review that the Deputy has made this morning.
I reiterate that receipts in 2018 were 50% higher than in 2015, which was the period examined, which underlines the need for this review. What I hear from the Minister is that he accepts the principle of a review of the sustainability of the corporation tax receipts. I welcome that. It is progress. Fianna Fáil is very happy to engage with the Minister on this issue. The review should be external to the Department of Finance, by which I mean no disrespect to the Minister's officials. We should try to work together to agree on terms of reference. The Minister should consult with bodies such as the ESRI and, indeed, the Irish Fiscal Advisory Council, on the best way to go about this. It does not need to be a very expensive external professional services firm. There is probably expertise in the State's ambit and we should consult with those bodies on precisely what we need to examine. However, I take it that the Minister accepts such a review in principle and I am offering to work with him and others to frame it and work through the best way of conducting such a review as it is a crucial question for the future of our economy and future prudent budgetary management.
I accept, as I have before, the principal of the need to do this. The Deputy raised it with me some weeks ago at the committee on Finance, Public Expenditure and Reform and Taoiseach. On the kinds of pressures and challenges that could develop in the coming period, I can see developments which might strengthen our position regarding corporation tax and can see developments that may also challenge that. Things that might benefit our position relating to corporation tax in the future, I can see that the policy stability maintained by my party and that of Deputy McGrath around rate and the ability to determine the debate and our determination to protect that amidst all the other changes now taking place in corporate tax policy in other countries could offer the potential for the progress we have made in corporation tax receipts being sustained into the future. As against that, in recent years we have seen a very strong performance in key corporate sectors in the global economy. Some of those are now experiencing challenges and we can see a shift in the tone of global trade. For all of those reasons, particularly when 2020 will be shortly upon us, I think we should examine the objective to which the Deputy referred and I will be happy to work with him on how best to do this.