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Corporate tax 'better to receive than not', TDs told

Corporate Tax


Minister for Finance Paschal Donohoe. Photo: Bloomberg

Minister for Finance Paschal Donohoe. Photo: Bloomberg

Finance Minister Paschal Donohoe has rejected a call for a fresh review of Ireland’s corporation tax system, while economist Seamus Coffey warned TDs that Ireland was better off receiving corporate tax paid by multinationals – regardless of highly critical reports.

The Oireachtas Public Accounts Committee (PAC) said yesterday that the high share of corporation tax paid by a small number of companies was “an unacceptable” risk to the sustainability of the tax regime and to overall Exchequer revenue.

Earlier, a study by academics in the US and Denmark named Ireland as the world’s biggest tax haven.In response, Mr Donohoe said his department had already had a review into the Irish corporate tax regime, carried out last year by UCC economist Mr Coffey.

“The Public Accounts Committee need to reflect themselves on why they’re calling for a review of our corporate tax code,” Mr Donohoe said.

“We’ve already done a review of our corporate tax code through the Coffey Report which we did last year… which I’m going to be acting on in the future.”

That report, last autumn, found a substantial boost in corporate tax receipts in 2015 could “be expected to be sustainable over the medium term to 2020” – but warned it was “impossible to be definitive and the volatility in receipts will remain”.

Mr Donohoe said he will outline within weeks a “roadmap for continued compliance of our tax code” with international standards laid down by the OECD. The OECD is carrying out a programme for reforming the way multinationals pay tax.

Mr Donohoe echoed comments from IDA boss Martin Shanahan who said earlier this week Ireland needs to maintain its competitiveness with other countries in order to win vital foreign direct investment. The Finance Minister said Ireland needs a competitive tax code.

Ashoka Mody, the former head of the IMF’s operation in Ireland, has warned the country is too reliant on low corporate taxes.

He said Ireland will need to develop a new growth model because of increased scrutiny on international tax havens, and the Apple tax ruling.

Mr Coffey is now the chairperson of the Irish Fiscal Advisory Council (IFAC) budget watchdog and also addressed the PAC report yesterday.

He told the budgetary oversight committee that the key issue is to “identify as a risk” the high concentration of corporation tax payments from a small number of companies.

“I think there’s no doubt that it’s better to be receiving this money than not receiving it. If corporation tax had stayed around €4bn or €5bn [annual receipts were over €8bn last year], we mightn’t be identifying it as a risk factor.

“I’m not sure I’d consider it an unacceptable risk… I think it’s just something we’ve identified as a potential issue,” Mr Coffey said. Ireland can focus on building up indigenous companies as well as having a competitive foreign direct investment strategy, he said.

However, the Government should not introduce permanent tax cuts or spending increases on the basis of corporate tax revenue, which is volatile, he said.

Over the last number of years, as the tax revenue increased much of it has been used up without necessarily improving the Exchequer balance, he said.

Gavin McLoughlin