Press release
Minister Donohoe publishes new analysis on Corporation Tax
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- corporate tax receipts have more than doubled in 5 years
- approx €1 in every €4 of all tax collected is corporate tax payments, the highest ever share
- this level shift-in corporate tax receipts raises legitimate questions regarding the sustainability of this revenue steam
- a reliance on potentially volatile sources of income to fund permanent increases in public expenditure is not sustainable for the public finances
- the analysis suggests the potential corporation tax revenue at-risk last year could be in the region of €4-6 billion
- there is a compelling case to treat a portion of corporation tax receipts as volatile into the future
- de-risking the public finances in this way could involve replenishing the Rainy Day Fund or establishing a fund to finance an ageing population
The Minister for Finance Paschal Donohoe today (Thursday) published an analysis by his department entitled De-risking the public finances – assessing corporation tax receipts.
The purpose of the document is to highlight the fiscal vulnerabilities stemming from the upward shift in corporation tax receipts, part of which could potentially be lost into the future. The analysis set out in the document builds on Addressing Fiscal Vulnerabilities, published by the Department of Finance in October 2019.
Commenting on the analysis set out in the Report, Minister Donohoe said:
“The analysis published by my department today highlights the risks associated with the recent upward shift in corporation tax receipts. Around €1 in every €4 of all tax collected originates from corporate tax payments – a figure which is exceptionally high in both historic and cross-country terms.
“To put it another way, just ten large corporation tax payers account for €1 in every €8 collected.
“The key message that flows from today’s publication is that a reliance on volatile sources of income to fund permanent increases in public expenditure is a potential blind-spot for the public finances.
“In my view, there is a strong argument to treat a portion of corporation tax receipts as volatile in nature. In doing so, we can address a key risk to the public finances and thereby help ensure our country’s fiscal sustainability."
The earlier document Addressing Fiscal Vulnerabilities is available below:
As recommended by the Irish Fiscal Advisory Council and the European Commission, the Department of Finance will publish a new measure of the general government balance, excluding potentially transitory or ‘windfall’ receipts (GGB*).
The Rainy Day Fund was initially capitalised with a €1.5 billion transfer from the Ireland Strategic Investment Fund; however the fund was liquidated in 2020 during the pandemic.
The National Pension Reserve Fund (NPRF) Commission was dissolved on 31 December 2021 with no assets remaining in the fund.