Finian McGrath (Dublin North Central, Independent)
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293. To ask the Minister for Finance the position regarding corporation tax (details supplied); and if he will make a statement on the matter. [21310/15]

Michael Noonan (Limerick City, Fine Gael)
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All companies operating in Ireland are chargeable to corporation tax at the 12.5% rate on the profits that are generated from their trading activities here. A higher 25% rate applies in respect of investment, rental and other non-trading profits, as well as certain petroleum, mining and land-dealing activities, and chargeable capital gains are taxable at the capital gains tax rate of 33%.

I am advised by the Revenue Commissioners that published statistics regarding receipts of corporation tax are available on the Revenue website at .

The Deputy may wish to note the amounts of profits, before allowing credits and reliefs, that are taxable at the different rates of corporation tax are published under the heading "Total Taxable Income" at .

The total amount of corporation tax collected in 2014 was €4.617bn. 

Due to the interaction of reliefs and allowances after the calculation of gross tax at the various corporation tax rates, it is not possible to identify the amount of receipts that are in respect of profits taxable at the 12.5% rate alone. However, I am advised by the Revenue Commissioners that the vast majority of the net receipts are from the standard rate of tax.

The Revenue Commissioners have advised that it is not possible to accurately estimate the additional revenue that may be brought in from increasing the 12.5% tax rate to 15%.  This would require ex ante knowledge of any behavioural changes on the part of taxpayers as a consequence. In terms of any increase in the 12.5% rate, the negative impact of behavioural effects on the corporation tax yield are likely to be relatively significant.

To give the Deputy an idea of what the effects of such a change could be, I would highlight that an OECD multi-country study found that a 1% increase in the corporate tax rate reduces inward investment by 3.7% on average. On this basis, it would take only a 2.5% increase in the rate (to 15%) to decrease Ireland's inward investment by nearly 10%. This OECD study assumes the average applies across the board but in fact the effect is likely to be more extreme for Ireland, given the economic challenges faced by a small island.

Last year my Department published the Economic Impact Assessment of Ireland's Corporation Tax Policy.  This contained the results of extensive research which was carried out and commissioned by the Department of Finance in 2014 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') were commissioned to carry out a study into the impact that the corporation tax rate has on the decision of firms to invest in Ireland.  This independent research found that if the Irish corporation tax rate had been 15% over the period of their sample, then the number of new foreign investments into Ireland would have been 22% lower.

Another paper, titled Literature Review of the Economic impacts of Corporation Tax highlighted research by the OECD and others that point to the importance of low corporate tax rates to encourage economic growth.

The maintenance of the standard 12.5% rate of corporation tax is therefore extremely important for Ireland's economy.  Ireland, like other smaller member states, is geographically and historically a peripheral country in Europe.  A competitive corporate tax rate is a tool to address the economic limitations that come with being a peripheral country, as compared to larger core countries.  Ireland's 12.5% corporation tax rate plays an important role in attracting FDI to Ireland and thereby increasing employment here.

This evidence underpins the Government's continued commitment to the 12.5% rate. 

These documents (and the others from the project) can be viewed on the Departments website at the following link: .