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Ireland's corporation tax take expected to rise again this year, but Donohoe admits it can't be relied upon in future

Donohoe said this morning that the Exchequer ran a €1.5 billion surplus last year.

Minister for Finance Paschal Donohoe
Minister for Finance Paschal Donohoe
Image: Sam Boal/Rollingnews.ie

Updated Jan 3rd 2020, 5:29 PM

THE DEPARTMENT OF Finance’s chief economist says he believes Ireland’s corporation tax take will rise again this year. 

While John McCarthy said his department is “in a difficult position” as this year’s Budget was based on a disorderly Brexit, he predicts another rise in corporation tax takings this year. 

From 2021 onwards however, the corporation tax windfall should “ease back”, he said. 

His comments come as 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.

Minister for Finance Paschal Donohoe has said the government is planning to run surpluses over the coming years to help the Exchequer cope with the potential for a fall in “volatile” corporate tax returns.

Donohoe admitted that the “risk is there” of the public finances taking a hit if even a couple of the massive corporations operating here were to pull out of Ireland. 

Speaking to RTÉ Radio One’s Morning Ireland, the minister said it is for this reason “we’re growing the surplus” which was €1.5 billion last year.

Exchequer figures released today show that total tax receipts were up €59.3 million, representing an increase of 6.8% from last year.

The over-performance in tax receipts will likely result in an overall general government surplus of 0.4 per cent of GDP (around €1.5 billion) for last year, an upward revision from the 0.2 per cent of GDP surplus set out in October.

McCarthy said the figure does not mean the corporation tax take is “sustainable”, acknowledging that it “can be moved offshore at the stroke of a pen”. 

Donohoe was asked about warnings made by the Irish Fiscal Advisory Council (IFAC) about this “volatile” corporate tax take.

In November, IFAC chairperson Seamus Coffey said that the top-10 payers of corporation tax account for about 45-50% of corporate tax receipts.

“So that’s a very significant amount of tax coming from a very small number of taxpayers,” he said.

Today, Donohoe said he agreed with IFAC’s assessment.

“It will be volatile in the future in terms of how it might change and it might go down,” he said.

That risk is there. That’s why we’re growing the surplus. If we didn’t have a surplus… that charge would have real potency.

“The way I’m looking to manage that risk is not spending more of that corporate tax figure,” he added.

Last year, the Department of Finance increased its projection for corporate tax take on a number of occasions.

Donohoe concluded:

I believe the increases we have seen in recent years – we cannot rely on them in the future. Growing the surplus [which] we’re announcing today is an imperative.

Additional reporting by Nicky Ryan and Christina Finn

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Sean Murray

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