Michael McGrath (Cork South Central, Fianna Fail)
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107. To ask the Minister for Finance further to Parliamentary Question No. 146 of 22 October 2015, the impact that any additional tax revenue in 2015 and 2016, over and above current projections, would have on the fiscal space for 2017; and if he will make a statement on the matter. [38793/15]

Michael Noonan (Limerick City, Fine Gael)
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Estimates of the gross and net fiscal space for the period 2017 to 2021 using the Expenditure Benchmark can be found in Tables A8 and A9 on pages C.50 and C.51 of the Budget 2016 book.

The Expenditure Benchmark, restricts the year-on-year growth of government expenditure, net of discretionary revenue measures, to given reference rates, adjusted by the GDP deflator. The relevant reference rate set by the European Commission annually is a 10 year average of the potential growth of the economy less a convergence margin. This is applicable in cases, such as Ireland's, where the medium term budgetary objective set under the balanced budget fiscal rule has yet to be achieved. In short, the Expenditure Benchmark adjusts the expenditure based on the previous year and only takes account of discretionary revenue measures.

Therefore additional tax revenue generated due to buoyancy, via growth in the economy or otherwise, has no impact on future available fiscal space. However, additional revenue generated via discretionary policy measures increases fiscal space but decisions which lead to a decrease in revenue reduce the overall fiscal space.

The carryover effect of Budget 2016 tax measures was taken into account when estimating the fiscal space available in 2017 included in Tables A8 and A9. It should also be noted that there is provision for indexation of the tax system included in the baseline Budget figures and the potential additional revenue that would be generated from a political decision not to proceed with indexation is included as a discretionary revenue measure in the fiscal space calculations in Tables A8 and A9. The final choice of measures will be a matter for decision by the next government.