Micheál Martin (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

94. To ask the Minister for Finance if he or his Department have completed an assessment on the implications of the United Kingdom's reduction in corporation tax rate to 15%; his views on same; and if he will make a statement on the matter. [20290/16]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I am aware of media comments from the UK Chancellor of the Exchequer earlier this week regarding a move by the UK to a corporation tax rate of less than 15%. This announcement is not surprising given that the UK had previously announced a cut to 17% by 2020.  There appears to be no timeframe set for this further reduction and we will have to wait and see the details when they emerge, for example whether the rate cut is to be paid for by compensating base broadening measures.  My Department will of course examine any such proposals when the details are available.

At 12.5%, Ireland has one of the most competitive and stable headline corporate tax rates in the OECD.  I believe that Ireland's long-term commitment to the 12.5% rate ensures that we remain highly competitive and supports Ireland's ability to attract and retain investment from around the world.  Our competitive rate of corporation tax has been an important part of our industrial policy since the 1950s, and has attracted real and substantive operations to Ireland since then.

In a recent research paper, commissioned by the Department of Finance as part of a Joint Research Programme with the ESRI, entitled "Corporate Taxation and Foreign Direct Investment in EU Countries: Policy Implications for Ireland", the Economic and Social Research Institute examined the extent to which Ireland and the UK are perceived as similar alternatives with respect to factors that determine the location choice of foreign affiliates.

The Report found that:

- Over and above the effect of corporate tax rates, a number of other location characteristics are found to significantly increase countries chances of being chosen as a location for FDI, including market size, access to the European Single Market, low production costs, high R&D capacity, as well as cultural and geographical proximity relative to investors.

- EU and non-EU investors value location characteristics differently. Investors from outside the EU are mainly seeking access to the European Single Market and are more likely to choose locations with low corporate tax rates. Intra-EU investments are more likely to be located in countries where the corporate tax is high but where they benefit from other local advantages such as low production costs.

The research concludes that in addition to maintaining a competitive corporate tax rate, Ireland's attractiveness to FDI would benefit from policies aimed at maintaining cost competitiveness and enabling further R&D investment.