Following the publication of the Summer Economic Statement on Tuesday we heard again about plans for the Government to set up a fund that would capture the windfall corporation taxes for some future use. These taxes are estimated to be anywhere up to €12 billion a year. Sums that we’re told we can’t necessarily rely on into the future for one reason and another.
Corporation tax receipts have grown substantially in recent years, in part due to foreign direct investors locating their intellectual property here against the backdrop of a global political storm about how little they were paying in tax via offshore locations. The growth in ecommerce during the pandemic, allied with a strong export performance by the pharma sector also helped to swell the coffers.
In 2021, our corporation tax receipts amounted to €15 billion, almost double the level of 2017. Last year, they hit €22.6 billion. This year, they are likely to exceed €26 billion, helped by iPhone sales routed through Apple’s Irish units.
From January, the rate of corporation tax will move to the global minimum of 15 per cent for companies with annual turnover of €750 million-plus as part of a deal agreed under the auspices of the OECD. This tax stream, which amounted to 27 per cent of the State’s revenues last year, is likely to bulge once more.
To date, there is no evidence that one of the big multinationals (10 of them accounted for 60 per cent of corporate taxes last year) is about to pull out of the country. And the OECD process to allocate profits to the country’s where the activity is generated is mired in delays.
[ Surging tax revenues provide Government with war chest ahead of budgetOpens in new window ]
So what if this revenue stream isn’t a windfall but simply a healthy recurring revenue stream for the State?
Is it right to hive off a large portion of our annual tax revenue for a rainy day? Or should we be putting the money to use now to fund new healthcare infrastructure and housing? Given his department’s failure to accurately predict this revenue stream in the first place, Minister for Finance Michael McGrath needs to make the case for why such a large chunk of this surplus should be squirrelled away.
