04/04/23

IRELAND: Jurisdiction set to exceed corporate tax forecast again this year.

As published on marketscreener.com, Tuesday 4 April, 2023.

Ireland is set to collect more corporate tax than forecast again this year, provided the economy faces no shocks, the finance ministry's chief economist said on Wednesday after company receipts surged in the first quarter.

Ireland collected 15% more tax than the record levels in the year-ago quarter, driven by a 71% year-on-year jump in corporate tax receipts, finance ministry data showed.

Corporate tax, mainly paid by Ireland's hub of large foreign multinationals, more than doubled in two years to a record 22.6 billion euros ($24.7 billion) last year. The finance ministry had pencilled in another 22.7 billion euros for this year.

"Whether we will over-achieve on the 22.7 (billion) in the absence of any shock to the economy, the answer is yes," John McCarthy told a news conference ahead of the publication of updated forecasts on April 18.

He added that the massive increases in corporate taxes will likely stop once new international rules on how multinationals are taxed kick in.

Wednesday's figure showed that VAT and income tax were 16% and 8% higher respectively year-on-year as incomes and consumer spending continued to grow strongly, although corporate tax was responsible for just over half the overall increase in revenues.

Ireland's Revenue Commissioners, which collects all taxes, believe the latest corporate tax surge probably in part reflects the earlier payment of taxes but also may not be a timing issue, McCarthy said.

Irish Finance Minister Michael McGrath is finalising proposals to set up a new fund to put surplus tax receipts aside to meet the costs of longer term pension and structural expenditure pressures.

He told national broadcaster RTE on Wednesday the fund would be actively managed to "get a significant return over time." His department will set out a range of options on what kind of fund the government might set up, McCarthy said.

Ireland was one of the few euro zone countries to record a budget surplus last year and its central bank sees the surplus rising to 2.7% of gross national income this year, and to 4.8% or almost 16 billion euros in each of the following two years.

McCarthy cautioned however that the updated forecasts will show a deficit at the end of the year without the large portion of corporate tax receipts his department deems as a windfall that may not be repeated. ($1 = 0.9135 euros) (Reporting by Padraic Halpin; Editing by Catherine Evans and Richard Chang)