IRELAND’S CORPORATION TAX is set to take a hit in the coming years due to changes to tax rules, according to the Finance and Public Expenditure Minister Paschal Donohoe.
The latest Exchequer figures show that taxation receipts for last year came in €1.4 billion ahead of original expectations, due to a very strong corporation tax performance this year.
In November, IFAC chairperson Seamus Coffey said that the top-10 payers of corporation tax account for about 45-50% of corporate tax receipts.
Last week, the Department of Finance’s chief economist John McCarthy warned that the current corporation tax take is not viewed as “sustainable”, acknowledging that it “can be moved offshore at the stroke of a pen”.
Fianna Fáil’s finance spokesperson has warned that the government is relying too heavily on the corporation tax take and said it is not reliable revenue.
Today, the minister warned that a hole of between €800 million and €2 billion in Ireland’s corporation tax take is predicted in the years to come.
From 2022 onwards, with the implementation of new tax rules under the OECD’s Base Erosion and Profit Shifting (BEPS) initiative there will be a reduction in corporation tax receipts by an incremental €500 million per year.
While there is some uncertainty surrounding this figure, it is the department’s best assessment, based on ongoing work being carried out by the Revenue Commissioners, that the overall risk could be in the range of €800m to €2 billion.
The minister told reporters that while corporate tax rules have changed under US President Donald Trump, Ireland’s tax take has increased.
However he said if Trump presses the case for a movement of tax rights back into larger economies like their own under the new OECD rules, that could impact on Ireland’s earnings.
Today, Donohoe also updated the Budget 2020 forecasts which in October was based on the potential for disorderly Brexit in 2020. Now that the risk of a no-deal Brexit has subsided, the government has updated the economy’s growth figures.
GDP is forecast grow by 3.9% this year, averaging 3% per annum in the first half of this decade. This is the prediction only if a free-trade agreement between the EU and UK is achieved.
Improved growth has allowed Donohoe to target a budget surplus of 1% at quicker pace – by 2021, subject to continued economic growth.
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