Dáil Éireann Debate, Wednesday - 26 April 2023
72. Deputy Ged Nash asked the Minister for Finance the methodology for determining what portion of corporation tax returns can be described as windfall; if he intends to commission an independent study of this to determine the prospects for future returns and what level may be one-off; and if he will make a statement on the matter. [19800/23]
View answerLast year as part of Budget 2023, my Department published an analysis entitled De-risking the Public Finances – Assessing Corporation Tax Receipts. This paper outlined a range of methodologies for estimating ‘windfall’ corporation tax receipts i.e. the amount that cannot be explained by underlying drivers and, therefore, may be more vulnerable to a shock. In general terms, the Department’s approach utilises scenario analysis, which inter alia links corporation tax revenue trends to historical norms and to domestic economic variables, to assess the extent of any potential windfall.
Based on this approach, the analysis concluded that somewhere in the region of €4 to €6 billion in receipts in 2021 were potentially transient in nature. It is important to stress that, in practice, the impact could be even larger, in particular, if there were spillovers to other tax revenue streams such as income tax.
Given the higher-than-expected outturn last year, the estimate for 2023 has been revised as part of the Stability Programme Update published earlier this month. As a result of this analysis, my Department now estimates that almost €12 billion in corporation tax are ‘windfall’ in nature. This represents a clear vulnerability in our public finances, with an underlying general government deficit of €1.8 billion this year in prospect if these receipts are excluded.
In addition to the work undertaken by my Department, other bodies have carried out similar analysis of previous year’s receipts: both the Central Bank and the Irish Fiscal Advisory Council have published independent estimates of windfall corporation tax in recent years.
