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Dept of Finance and Fiscal Council in war of words over tax research


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Analysis: Seamus Coffey was head of the Fiscal Council  when it disagreed with Paschal Donohoe’s department

Analysis: Seamus Coffey was head of the Fiscal Council when it disagreed with Paschal Donohoe’s department

Analysis: Seamus Coffey was head of the Fiscal Council when it disagreed with Paschal Donohoe’s department

THE Department of Finance has accused the Irish Fiscal Advisory Council of misrepresenting the main findings of a report on Ireland's corporation tax take.

A sharp exchange of emails between the two bodies came last November surrounding publication of the Fiscal Assessment Report, a key part of Ireland's annual budget process, when the Fiscal Council warned that up to €6bn of corporate tax income a year could be at risk, because it was unexplained by economic performance.

The argument related to interpretation of research by two senior Department of Finance economists on how corporation tax can be modelled.

According to the Department's study, 90pc of corporation tax income could be accounted for using complex econometric models.

However, the Irish Fiscal Advisory Council believed the figure was closer to 30pc - making the tax take far less predictable.

In an email, the Department's Fiscal Analysis Unit said the Fiscal Council report "misrepresents the main findings of the paper".

It said it was "highly selective" to reference the paper in the way it had been in the Fiscal Assessment Report.

In response, Fiscal Council chief economist Eddie Casey insisted that the interpretation was correct. "That may be your opinion or someone else in the Department's," he wrote. "I disagree with it.

"Moreover, I checked that specific wording and representation of the findings with the author in advance and they did not indicate any disagreement with it."

Responding to the email, the Department of Finance said that was not its understanding of what had happened.

The Fiscal Analysis Unit wrote: "In relation to the exchange below and your interpretation of the paper and the press release that accompanied it, we'll have to agree to disagree.

"For the record, we would also refute the suggestion that one of the authors 'did not indicate any disagreement with it'."

In response, Mr Casey said that while he was "happy to disagree", the Department was "clearly in the wrong here". He said he had quoted the sentence over the phone with an author of the paper and outlined his interpretation.

"No issues were raised," wrote Mr Casey. "You weren't on the call and you aren't an author of the paper."

Mr Casey also said it was "highly misleading" to suggest that the models involved accounted for the majority of corporation tax take.

He said it was an "excellent paper" but that it could not reliably be used to account for how Ireland's corporation tax take might change over a longer period of time.

Asked about the disagreement, Mr Casey said it was about "interpretation of economic models" which can be "read in different ways".

The Department said: "It is not unusual for disagreements of this type to arise."

Separately, the Fiscal Council questioned why it could not pay relocation expenses to new staff.

Irish Independent