War of words over corporate tax take

The Department of Finance is accusing the Irish Fiscal Advisory Council (IFAC) of misrepresenting the main findings of a report on Ireland’s corporation tax take.

A sharp exchange of emails between the two bodies occured in November surrounding publication of the fiscal assessment report, a key part of Ireland’s budget process each year.

These have been released in response to a Freedom of Information query.

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

In an email, the department’s fiscal analysis unit said the IFAC report “misrepresents the main findings of the paper”.

They said it was “highly selective” to reference the paper in the way it had been in the fiscal assessment report.

In response, IFAC chief economist Eddie Casey insisted that IFAC’s interpretation was correct.

“That may be your opinion or someone else in the department’s,” he said. “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 said that was not their understanding of what had happened.

Their 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,” he said. “You weren’t on the call and you aren’t an author of the paper.”

Mr Casey said it was “highly misleading” to suggest that the models involved account for the majority of corporation tax take in Ireland.

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.

Asked about the disagreement, Mr Casey said the issue was around the “interpretation of economic models” which he said could be “read in different ways”.

He said: “Much of the model’s ability to explain corporation tax in a given year is the result of knowing the outturn of the previous year and the forecasting success would be much lower for longer forecast horizons.

The department: “It is not unusual for disagreements of this type of arise. To clarify and resolve the matter, an official within the department rang the Fiscal Council and discussed some of the technical aspects within the modelling paper.”

Separately, IFAC also questioned the department over why they could not pay relocation expenses to staff they were about to hire.

The department said that government policy was that such expenses could only be paid to “existing, serving public servants”.

In an email, IFAC quoted instances where the HSE and two universities appeared on their websites to offer to pay costs to new staff who were joining them.

The department said the HSE example related to attracting nurses back to Ireland and was based on a “particular business case”.