Jim O'Keeffe (Cork South West, Fine Gael)
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Question 198: To ask the Minister for Finance if a study has been completed regarding the benefits of introducing here a flat tax on personal and corporate income; and if he will make a statement on the matter. [15687/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I am aware that a number of eastern European countries have introduced a flat rate of tax on personal and business income. The tax policies of individual countries reflect a range of factors and democratic choices, social, economic and cultural.

The Irish tax system as it has developed, particularly over the period 1997 to date, with lower rates of personal and business taxation, has proven, along with other factors, to be a very successful tool in incentivising and creating employment and in attracting and retaining inward investment. The most recent OECD data relating to the year 2004 show that for the single worker on the average production wage, Ireland has the lowest tax wedge, that is, income tax plus employee and employer PRSI as a proportion of gross wages plus employers PRSI, in the EU and one of the lowest in the entire OECD. According to data from the United Nations Conference on Trade and Investment, foreign direct investment flows into Ireland in 2003 amounted to the equivalent of about €19.5 billion. This represents 8.5% of all foreign direct investment flows into the EU 15 in 2003; a very strong performance given that Ireland's share in the EU 15 population is only approximately 1%. Indeed, in absolute terms only six other countries in the world registered larger FDI inflows in 2003 than Ireland. With the exception of Luxembourg, all of these countries were larger than Ireland, most considerably Spain, Belgium, France, China and the US.

Economic growth has been sustained at higher levels than our EU counterparts and the role that taxation has played in the success of the Irish economy, especially in recent years, has been widely recognised internationally. Having regard to the success of the Irish tax system in contributing to our economic development, I see no need at present to explore alternative models which would involve a dramatic shift from our current approach.