Dáil Éireann Debate, Thursday - 5 October 2023
201. Deputy Róisín Shortall asked the Minister for Finance if he has considered recommendation one of the Commission on Taxation and Welfare that, given the medium-to long-term threats to the State’s fiscal sustainability, the tax base should be broadened; if he will commit to implementing this recommendation; if he intends to act on this key recommendation in budget 2024; and if he will make a statement on the matter. [43389/23]
View answerAs the Deputy has indicated, the Commission on Taxation and Welfare has recommended that the overall level of revenues raised from tax and PRSI must increase materially as a share of national income to meet the medium- to long-term threats to fiscal sustainability.
However, as the Commission’s recommendations are significant and wide ranging, it is important to allow sufficient time for detailed consideration. In fact, I would note that, in its report “Foundations for the Future ”, the Commission acknowledged that its recommendations are not intended to be implemented all at once. Instead, they are intended to provide a clear direction of travel for this and future Governments around how the sustainability of the taxation and welfare systems may be improved in a fair and equitable manner.
On the subject of broadening the tax base generally, the Government is aware of the importance of implementing a broad-based tax system. To this end, a range of structural tax changes have been implemented over the last two decades. These include the introduction of the Universal Social Charge, Local Property Tax, the Carbon Tax and the Sugar-Sweetened Drinks Tax. Steps have also been taken to broaden and enhance the stability of our corporation tax base, including through the introduction of the 80 per cent cap on capital allowances for intangible assets and the introduction of a broader Exit Tax regime. Significant progress was also made in phasing out and curtailing many tax expenditures. As a result, the tax base was widened considerably and re-oriented towards more stable revenue streams.
I would note that all taxheads have a role to play in ensuring the stability of the tax base. The Government is fully aware of the risks associated with the current level of concentration and volatility in the tax base and will continue to monitor the situation closely so that the risks of over-reliance on potentially cyclical or over-concentrated receipts under specific tax heads can be understood and mitigated. However, excessive changes that adversely impact on the tax base would risk repeating the mistakes of the past by narrowing the overall tax base and leaving our public finances vulnerable to external shocks.
As the Deputy will be aware, the Government is working to mitigate these risks. As such, €6 billion in windfall corporation tax receipts have been transferred to the National Reserve Fund to rebuild our fiscal buffers. This will also ensure that these receipts are not used to fund permanent expenditure commitments. In May 2023, my Department also published a scoping paper which sets out a number of proposals for a longer-term investment vehicle. This will enable Government to use some of this windfall to prepare for the structural fiscal challenges on the horizon, including the costs associated with an ageing population.
Finally, I would note that the best way to ensure the sustainability of our tax base is by continuing to pursue a budgetary policy that balances continued investment in our public services and infrastructure with the long-term sustainability of our public finances. However, it is a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any matters that might be the subject of Budget decisions.
