It has never been 100 per cent clear why corporate tax revenue in the Republic has surged. The onshoring of assets has often been proffered an as explanation.
Apple relocated a significant chunk of intellectual property here in 2015, triggering a bulge in our gross domestic product numbers and the “leprechaun economics” tag. There has also been the notion that certain capital allowances have run out, leaving multinationals with bigger liabilities.
However, the most cogent explanation all along has been increased corporate profitability. Central Statics Office (CSO) data, published on Tuesday, indicated the profits of corporations operating in the Republic last year came to nearly €300 billion (€297.5 billion to be precise). Foreign-owned corporations accounted for €261 billion or 87 per cent.
“The results show that profits in foreign-owned corporations are growing at a faster pace [than Irish-owned ones], with 2022 profits of €261 billion representing a 98 per cent increase over 2017,” said Conor Prescott, national accounts income statistician at the CSO.
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The profits of corporations operating here came to near €80 billion in the fourth quarter of 2022 alone, a 30 per cent increase on the same period in 2021.
Corporations in the industry sector – which includes pharmaceuticals – were the largest earners, making a profit of €43.2 billion. The information and communication sector was the next largest with firms generating profits of almost €20 billion.
These figures perhaps best explain why the Government will most likely net a record €24 billion in corporate tax receipts this year. The introduction of the new 15 per cent minimum tax rate for large companies under the OECD-led reforms is likely to boost this further. The Department of Finance is expecting to bring in €27 billion in receipts by 2026 and this could underestimate it.
While the State is expected to lose out from the reallocation of taxing rights in favour of bigger countries – the other element of the OECD’s reform agenda – that is mired in disagreement and faces political opposition in the United States.
