Government ‘should adopt’ minimum effective corporation tax rate of 10%

Social Justice Ireland (SJI) has called on the Government to adopt a minimum effective rate of corporation tax of at least 10 per cent.

In a pre-budget submission, the advocacy group said Ireland’s headline 12.5 per cent rate has been the subject of increasing controversy in recent years.

“This is not so much because it is low, but because the effective rate [the rate actually paid by corporations after taking into account tax breaks] that some large firms is considerably lower,” it said.

Rate

The group said the Government should adopt an effective minimum rate of 10 per cent and that Budget 2022 should commence the adjustment to this rate by adopting a rate of 6 per cent.

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This would raise an additional €1 billion for the exchequer, it said.

“Profitable firms with substantial income should make a contribution to society rather than pursue various schemes and methods to avoid such contributions,” it said.

In its submission, SJI said the Government must not make the mistake of focusing “on some arbitrary deficit target” as the pandemic recedes and the economy recovers.

It said “ extraordinary” Government expenditure will be required to sustain demand and to support incomes.

The group identified a list of challenges - most of which pre-date the pandemic - that need to be prioritised, including a persistent child poverty problem, the low pay of many of our essential workers, a two-tier health system and youth unemployment.

It also highlighted that the State’s housing crisis, noting the possibility of buying a home was “moving further and further away from the vast majority” while rents in some parts were “exorbitant”.

The group’s budgetary package included €4.5 billion in spending on housing, which it said could be paid for through several additional revenue-raising measures, including the minimum effective corporate rate and a standard rate for pension-related tax reliefs.

It said budgetary policy over the next few years should focus on widening the tax base.

Challenges

One of the lessons gleaned from the pandemic is that the State may need to expand so as to deal effectively with challenges, the group's research and policy analyst said Michelle Murphy said. "In responding to Covid-19, Government made the changes required to protect both society and the economy and the common good featured prominently in planning and delivery," she said.

“ The State, the only institution with the required capacity to address the pandemic, expanded to meet the challenge. Yes, mistakes were made in responding to Covid. But lessons were learned; protecting jobs, services and a minimum standard of living were priorities,” she said.

The group’s chief executive Seán Healy said :“Proceeding as we did before the pandemic will not address the challenges Ireland faces, challenges that existed before the arrival of Covid-19.”