Written answers

Tuesday, 7 July 2020

Department of Finance

Programme for Government

Photo of Gerald NashGerald Nash (Louth, Labour)
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196. To ask the Minister for Finance his plans to move to a more sustainable tax environment as stated in the programme for Government in view of potential international corporation and digital tax changes; and if he will make a statement on the matter. [14592/20]

Photo of Gerald NashGerald Nash (Louth, Labour)
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213. To ask the Minister for Finance his plans to implement the Roadmap on Corporation Tax Reform; and if he will make a statement on the matter. [14609/20]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 196 and 213 together.

In September 2018 my Department published Ireland's Corporation Tax Roadmap. This Roadmap set out the progress made at that time, and the direction in which we would go, towards ensuring that Ireland's corporation tax regime remained appropriate in order to support economic growth and prosperity.

Significant actions have been taken on foot on the Roadmap including the introduction of Controlled Foreign Company rules, amendments to Ireland’s exit tax rules, the quick ratification of the BEPS Multilateral Instrument. Most recently, Finance Act 2019 introduced new anti-hybrid mismatch rules in line with our commitments under the Anti-Tax Avoidance Directive, and reformed our transfer pricing provisions ensuring they comply with OECD standards.

The Programme for Government reaffirms our commitment to the 12.5% corporation tax rate. It also confirms that this Government will continue both to implement the Corporation Tax Roadmap and to engage constructively on international tax reform through the OECD process.

As set out in the Programme for Government, this Government recognises that taxation policy needs to reflect a changing digital economy. This work is best done through the OECD, as opposed to unilateral measures that could undermine trade. Ireland remains actively involved in that important work at the OECD on addressing the tax challenges arising from the digitalisation of the economy.

I intend, later this year, to publish an update on Ireland's Corporation Tax Roadmap. This update will reflect on the significant progress we have made and consider what future actions may be needed to ensure Ireland's tax system meets international standards. It will also provide an opportunity to reflect on the evolving international tax environment and the important work that continues at the OECD.

Photo of Gerald NashGerald Nash (Louth, Labour)
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197. To ask the Minister for Finance his plans to increase purely domestic activity as indicated by GNI as part of a more sustainable tax environment outlined in the programme for Government in view of identified external market risks such as Brexit and increased trade tensions; and if he will make a statement on the matter. [14593/20]

Photo of Gerald NashGerald Nash (Louth, Labour)
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202. To ask the Minister for Finance the way in which he plans to utilise taxation measures to close the deficit as outlined in the programme for Government; if he plans to predominantly use progressive or regressive taxation measures to achieve same; and if he will make a statement on the matter. [14598/20]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 197 and 202 together.

The Programme for Government “Our Shared Future” contains a number of commitments in the area of budgetary policy and taxation including a commitment to use both taxation measures, as well as expenditure measures, to close the deficit and fund public services if required. In doing so, the Government will seek to focus any tax rises on tax behaviours with negative externalities such as carbon tax, sugar tax, plastics. A key focus of the Programme for Government is to get people back to work as quickly as possible, in order to restore the public finances and enable the provision of better and more accessible public services on a sustainable and long-term basis. A stable and sustainable regulatory and tax environment and sound management of the public finances will allow investment in the infrastructure and skills required to enhance competitiveness.

Looking ahead, fiscal policy is based on a three phased response:

- During the initial phase, phase one, swift action was taken to introduce emergency measures aimed at protecting individuals and businesses during the initial period of uncertainty.

- The focus of the next phase of the response, is on ensuring that the economy returns to growth. The main concern in this recovery phase will be to get as many people back to work as quickly as possible and the State will have a role to play in that regard.

- Over the longer time, fiscal policy will be required to pursue a credible path towards budgetary sustainability; to provide confidence to businesses, the public and to demonstrate that Ireland is back on the right path again.

It is important to note that Ireland has one of the most progressive income tax systems in the developed world – the most progressive within the EU members of the OECD. A progressive income tax system means that those on higher incomes pay proportionately higher rates of tax than those on lower incomes. It is a broad-based income tax system, where the majority of income earners make some contribution but according to their means. As a matter of policy, taxation measures are reviewed on a regular basis as part of the annual Budget and Finance Bill process.

The Programme for Government sets out the commitments for the 5-year term of the Government which has just been formed. The immediate focus of Government is on a fiscal stimulus plan to introduce a package of measures that will build on existing measures in order to help kick-start the economy, safeguard jobs and protect people’s livelihoods. Therefore, as I have previously stated, the short-term focus is on supporting households and firms, to limit the medium term impacts on the economy and to lay the ground for recovery. In October, the Government will set out the medium term budgetary strategy to restore fiscal balance.

Photo of Gerald NashGerald Nash (Louth, Labour)
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198. To ask the Minister for Finance the timeline for the establishment of a commission on welfare and taxation as outlined in the Programme for Government; and if he will make a statement on the matter. [14594/20]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The Programme for Government “Our Shared Future” contains a number of commitments in the area of budgetary policy and taxation including a commitment to the establishment of a Commission on Welfare and Taxation. The stated purpose of the Commission will be to consider how best the tax system can support economic activity and promote increased employment and prosperity while ensuring that there are sufficient resources available to meet the costs of the public services and supports in the medium and longer term.

The Programme for Government sets out the commitments for the 5-year term of the Government which has just been formed. The work of the Commission should help to set the framework within which tax policy will be determined for the next decade and I believe that it is important that the Commission take a strategic, considered and balanced perspective that recognises the emerging and significant challenges in our economy and society.

The immediate focus of Government is on a fiscal stimulus plan to introduce a package of measures that will build on existing measures in order to help kick-start the economy, safeguard jobs and protect people’s livelihoods. In due course, the details of the proposed Commission on Welfare and Taxation. including the membership, the terms of reference and the reporting date can be considered and agreed.

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