One swallow doesn’t make a summer, as they say. And one set of poor corporation tax figures does not make a trend.
There was a surprise jump in corporation tax payments in August last year, apparently due to some early payments by big companies. And so the €1 billion drop in monthly revenue this August to €1.78 billion may not amount to a turn in the positive trend in this vital source of revenue.
But trends for the rest of this year will now be closely watched. At stake is not so much the tax outlook for this year, but more what is in prospect for 2024 and the year’s after.
To put it all in perspective, corporation tax payments so far this year are €12.6 billion, up 7.3 per cent or €900 million on the same period in 2022 – and the main payment period for the year still lies ahead.
There have been a few blips along the road of the seemingly endless rise in corporation tax since around 2015.
This may be another one, though signs of lower profitability in the tech sector and a general international economic slowdown could have an impact.
[ Fall in corporation tax in August hits exchequer figuresOpens in new window ]
On the flip side, there are positives for 2024, including the increase in the effective corporation tax rate on the biggest players to 15 per cent.
Also, the gradual running out of tax allowances on massive intellectual property investments relocated to Ireland after 2015 will expose more income booked here to tax.
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In one sense, the figures will be quietly welcomed by the two budget ministers, Michael McGrath and Paschal Donohoe. McGrath was out quickly to say that the figures were a timely reminder of the underlying vulnerabilities facing Irish public finances.
This message will be hammered home to the rest of the Cabinet, already pressing for big budget day tax and spending measures, both once-off and permanent.
The real answer about the likely trend in revenues will come later on in the autumn, with corporate tax payments based on potential profitability this year. They will have a vital impact on the run in to the next general election.
