Speech to the Irish Tax Institute Annual Dinner

28th February, 2020

Good evening everybody.

It is my great pleasure to be invited to attend your annual dinner this evening and I would like to begin by thanking Frank Mitchell, President of the Irish Tax Institute, for giving me the honour of addressing you again this year.

I would like to reflect on two broad themes which I will set in the context of where, in my view, the Irish economy is positioned at present. 

The first theme relates to the inevitability of change in the corporation tax landscape and the need to run budgetary surpluses. 

The second relates to tax fairness and the need to ensure that the tax system and the actions taken by all stakeholders are consistent with this important principle.

Let me begin with the current status of the Irish economy

Irish economy

A decade ago, the Irish economy was at the coal-face of the most severe global economic recession in decades.

We have come a long way since the financial crisis, and our economy is now in a much healthier position.

Living standards have recovered and measures of well-being have improved.

After almost a decade of continuous expansion, the Irish economy continues to grow at a robust pace. 

There are now more people at work in Ireland, surpassing the pre-crisis peak. 

Average weekly earnings rose by 3.6% across the Irish economy last year.

It is notable that earnings are now rising at a faster pace than house prices, meaning that house price affordability improved in 2019, and continued strong momentum in income growth should see further improvements in this area.

Importantly, unlike in the pre-crisis years, growth remains well balanced and broad-based. 

Today’s labour market is more balanced.

So while there is much understandable focus on what is wrong, and on what needs to be done better let me also emphasize the new Government, when it is formed, will be inheriting an economic landscape very different from a decade ago.


This will be particularly important given potential developments with Brexit.

The negotiations on the future relationship between the EU and the UK will begin next week.

These negotiations are going to be complex and challenging, given the breadth of the issues to be addressed within a short timeframe.

The British Government has said it does not want to extend the current transition period, which means an agreement must be reached before the end of the year.

We want to see an ambitious and fair partnership that works for the benefit of all, that minimise barriers to trade with our nearest neighbour and that provides a basis for cooperation with the UK in a wide range of areas.

This ambition is in keeping with the Political Declaration agreed with the UK last October, and reflected in the EU’s mandate for the negotiations adopted earlier this week.

Together with our EU partners we have shaped this mandate, which will guide the EU’s approach to the negotiations.

From an Irish perspective, the focus in the mandate on protecting the Good Friday Agreement and the Common Travel Area is particularly welcome, as is ensuring that issues arising from our unique geographic situation are addressed.

Yesterday, the UK Government set out its approach to these negotiations.  We will study their proposals carefully.

We fully respect the UK’s right to chart its own course and to choose to diverge. But such a decision comes with consequences.

Divergent regulatory regimes create implicit barriers to trade.

These can include quotas, embargoes, sanctions, licences, trade documents, standards, or any criteria required for entry to a given market. They are enforced by border checks, customs procedures, and documentary compliance.

An FTA may reduce or eliminate tariffs, but non-tariff barriers can impose significant costs.

In fact, research from the OECD has estimated that the impact of non-tariff barriers can be multiples of the impact of tariffs.

We should also recall that the outcome of the future relationship negotiations will have an impact on the arrangements necessary to implement the Protocol on Ireland and Northern Ireland.

The Protocol sets out the rules of the Single Market necessary to avoid a hard border.  Checks will have to be carried out on goods as they enter to ensure that anything going into Northern Ireland meets these regulatory standards.  This is how the Single Market will be protected.

It is clear that a close, EU-UK relationship will support this work and I welcome the UK Government’s commitment during Michael Gove’s statement in Parliament yesterday that its approach to the negotiations will be in full respect of the Protocol on Ireland/Northern Ireland. 

The UK is our neighbour and friend, and we wish to see the closest possible relationship that can be agreed in the negotiations.

But much will depend on the approach that the UK takes.

And we must recognise that, regardless of the outcome, there will be change, particularly for businesses trading with the UK.

Economic risks and corporation tax receipts

So, while the Irish economy continues to grow at a robust pace, it is clear that over the short to medium-term it also faces an increasing number of significant risks. 

The likely impact of some of these broad risks are difficult to gauge but one thing we can be certain of is that the current high levels of corporation tax receipts cannot be relied on into the long term. 

We have seen a large increase in corporation tax receipts since the mid-part of this decade. 

A further increase is likely but, subsequently I expect these receipts to begin to fall.

This is based on the current analysis available to me from the Department of Finance and the Revenue Commissioners.

The Department published a Medium Term Fiscal Strategy on the 9th January. It makes provision for an OECD BEPS-related impact of up to €2 billion by 2025. 

Notwithstanding this provision, it is important to acknowledge there is considerable uncertainty around both the very nature and impact of the OECD proposals.

Quantifying the behavioural response of firms and other governments to minimum tax rate proposals that have yet to be articulated is a particularly difficult task.

For this very reason, our fiscal strategy will deliver and maintain a surplus in excess of 1 per cent of GDP (or €4 billion) by 2021.  This will provide capacity for the Irish economy to absorb any revenue losses beyond the provisions already made.

A surplus is needed to cope with the coming change in corporate tax revenue.

We can do this while also meeting the many societal needs that were such a feature of the recent election, from acting on the climate crisis to improving outcomes in health, to the provision of affordable housing and pensions and to urban and rural regeneration.

The revised fiscal framework published by the Department of Finance last month envisages annual Budget packages of around €3 billion in average out to 2025 and importantly this is additional to the pre-committed capital envelope out to 2022.

No Minister for Finance can ever accommodate all tax or spending proposals. The essence of doing the right thing by our citizens is to strike a balance between competing needs.

As such, I am particularly struck by the manner in which some influential voices both during and since the election have advised me to both mitigate the corporation tax risk by running surpluses while also advocating very significant and unfunded increases in the size of the state.

It is a circle that is impossible to square and a debate that therefore requires a greater sense of reality and as we debate the policy priorities and political choices the next government will face.

OECD reforms

The expected change in future Corporation Tax yields will largely arise from the eventual outcome of ongoing discussions at OECD level on international taxation. 

This work on international tax reform is entering a crucial phase. 

Although there is strong support for the principles underpinning this work, important questions remain to be answered before we will have a workable agreement. 

Nevertheless, there is a clear ambition to progress this work by July when important Ministerial meetings will be held to determine what level of agreement is possible.

It is not inevitable that agreement is reached at the OECD. 

The alternative to an agreed solution however is not the status quo. 

Should the work fail at the OECD, we are still likely see significant changes taken by countries.

Such changes however will be uncoordinated unilateral measures which are likely to lead to greater uncertainty, double taxation and growing global trade tensions.  

I continue to believe that finding a balanced solution for a realignment of taxing rights is in Ireland’s best interests. 

It would provide certainty and stability for the international tax landscape into the medium term. 

This would allow greater planning by both companies and countries as to the level of tax payments and receipts supporting economic growth and job creation. 

I remain to be convinced of the need for the proposals under consideration on minimum taxation which go beyond the objective of addressing the tax challenges of digitalisation.

Whatever the outcome of this work in Paris, we can expect the focus to quickly shift to Brussels. 

The new European Commission will publish a roadmap on Business Taxation in the 21st Century later this year. 

This is expected to include consideration of how any OECD agreements could be implemented at EU level. 

Should the OECD work fail to reach agreement, the new Commission roadmap is expected to leave no doubt that measures to address both the taxation of digital companies and separate proposals on minimum taxation will be tabled.

Ireland has been a strong contributor to this international tax reform project from the outset. 

While these are challenging debates for Ireland, our interests are best served by trying to influence the shape and design of any potential agreement. But this is why budgetary surpluses will be needed.

Tax fairness

Which brings me to the issue of tax fairness.  Ireland’s ability to shape and influence the direction of global tax policy is heavily dependent on our reputation and the actions we take, both Government and the wider tax and business community. 

While governments worldwide are doing their part by amending rules both globally and domestically this is a shared challenge.  

Globally, tax advisors, tax lawyers, and the professional services industry must also play a part.

It is in everyone’s long-term interests that advisers make long-term decisions with their clients, conscious of the broader objectives and the standards that the public expects.

Ensuring our domestic tax code is fair and robust is also vital to strengthen our hand when putting forward the case internationally for our approach to corporation tax. 

Tax fairness however is not just an international question.

The tax system for domestic enterprises must also be effective and fit for purpose. 

In Finance Act 2019 I introduced a number of changes to the taxation of property investment vehicles, to address concerns identified following a review of tax returns and financial statements filed early last year.

Let me be clear, institutional investors have a critical role to play in financing and increasing supply of property at a time when a key challenge facing the country is to address housing availability and affordability.

Indeed, some of the developments now taking place in our urban areas would not be happening without this institutional investment.

However, it is also essential that a balance is struck between supporting the development of new homes and commercial premises and ensuring that an appropriate level of tax is paid by such investors. 

The changes introduced are intended to ensure that the IREF and REIT regimes operate as intended, with a fair share of tax being paid where profits are earned in Ireland. 

Finally, another key element of fairness in a tax system is access to a timely and efficient appeals process. 

Those of you who attended this event last year will recall that I spoke of the challenges facing the Tax Appeals Commission and my commitment to ensure that it was appropriately resourced to deliver on its important mandate.

Over the last year, three additional Temporary Appeal Commissioners have been appointed to the Commission; administrative support staff numbers have doubled; and the process of recruiting a Chairperson to lead the Commission is now reaching its conclusion. 

We are already seeing an increase in the number of determinations issued and I expect that significant progress will be made in clearing the appeals backlog over the coming year.


In closing, I cannot let the occasion pass without offering some reflections on the recent election and the path ahead.

At risk of repeating the conventional wisdom, it is clear that many voted for change.

It will take some time for the political system to work through the many signals sent to it by the electorate.

In the meantime, as someone whose commitment has always been to the renewal of the centre ground of politics, it is clear to me that those features of the political centre that appeal to voters can also become weaknesses in an era where the substance and tone of politics has become more polarised.

It is challenging to rally people behind a message of pragmatism, compromise and incremental change when other voices are offering simpler solutions in an increasingly complex world.

Clearly the centre is shifting and it is incumbent on those of us who want to protect and maintain it to be in a position to adapt to the new challenges that present themselves today.

The centre cannot be the same as the status quo. For too many it is.

The centre must respond. We will.

I would like again to thank the Irish Tax Institute for inviting me to address you.  Members of the Institute make significant contributions to the Department’s various public consultations which are of great value in identifying the potential effects of different policy options and informing the design of polices that are operable in practice in addition to being robust.

I hope that this very positive engagement will continue over the coming year.