01/09/22

IRELAND: State's over-reliance on multinational tax receipts poses a risk, according to report.

As published on irishexaminer.com, Thursday 1 September, 2022.

An external shock to Ireland's multinational sector would have serious repercussions for the country's finances as a large share of the country's income tax and corporate tax receipts comers form just a small number of large companies.

The Annual Taxation Report published today shows that one in every four euros taken in tax is now sourced from the corporate sector either through the income tax from the sector's employees or through corporation tax.

The sector itself is further concentrated with just 10 taxpayers paying 53 per cent of all corporation tax receipts last year. A decade ago, this figure was closer to one-third.

Ireland is home to some of the world's largest tech and pharmaceutical companies many of which have seen revenues and profits surge despite the impact of the pandemic.

The share of corporation tax as a percentage of overall tax revenue in Ireland is more than twice the EU average of 6.3 per cent. Last year €1 in every €8 collected by the State is sourced from a very small number of highly profitable firms.

In stark contrast, receipts from small and medium enterprises (SMEs), which represent a much smaller fraction of overall revenues and were more exposed to the pandemic, experienced a sharp drop during the pandemic before rebounding in 2021.

"Put simply, the narrowness of the tax base represents a significant vulnerability, yet the resilience in corporation tax during the last two years was due to a relatively small number of large payers," the report states.

"A shock to this relatively narrow tax base could have wider repercussions for the public finances."

Asked about the vulnerability the public finances face from an overreliance on a small number of multinationals Minister Donohoe said they have not changed expenditure ceilings as corporate tax receipts have increased.

"They have not led to me during the heart of Covid changing my plans because our tax receipts are higher than we anticipated," he said.

"That is the reason why even though corporate tax has gone up again it's not money that we are currently spending."

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