Eoghan Murphy (Dublin South East, Fine Gael)
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Question 205: To ask the Minister for Finance the effect on Revenue respectively of a 0.5% increase and a 0.5% decrease in corporation tax; the way either scenario might affect foreign direct investment; and the way either change would place us in comparison with our EU partners. [27933/12]

Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that the full year yield to the Exchequer, estimated in terms of 2012 profits, of increasing the standard rate of corporation tax from 12.5% to 13% is tentatively estimated on a straight line arithmetic basis to be about €135 million. A corresponding reduction in the rate would result in a cost to the Exchequer of a similar amount. This estimate does not take into account any possible behavioural change on the part of taxpayers as a consequence of the proposed changes. In terms of an increase in the 12.5% rate, estimating the size of the behavioural effects is difficult but they are likely to be relatively significant. An OECD multi-country study found that a 1% increase in the corporate tax rate reduces inward investment by 3.7% on average. While a reduction in the rate might be expected to have a positive impact on inward investment, it would be difficult to justify such a move in the context of Ireland's consistently strong view that it will not change its corporation tax strategy. Even a marginal change would undermine both our long held stance on this issue and the certainty of business, domestic and international, in our resolve to maintain that position.