John Lahart
Question:129. Deputy John Lahart asked the Minister for Finance for a report on the trend in corporation tax revenue stream since just before the pandemic. [30037/23]
View answerThursday, 22 June 2023
Questions (129, 131, 146)
Robert Troy
Question:131. Deputy Robert Troy asked the Minister for Finance his assessment of the vulnerabilities the public finances face from a revenue perspective. [30040/23]
View answerJohn Lahart
Question:146. Deputy John Lahart asked the Minister for Finance his estimate of the level of windfall receipts since the start of 2022; and if he will make a statement on the matter. [30038/23]
View answerWritten answers
I propose to take Questions Nos. 129, 131 and 146 together.
Last year, corporation tax receipts amounted to €22.6 billion, more than double their position at end-2019 immediately prior to the onset of the pandemic and surpassing VAT for the first time to become, at least temporarily, the Exchequer’s second-largest source of taxation revenue. This continued a trend of rapid growth in corporation tax over the last decade, with receipts now standing at more than five times their level in 2013.
As I have stated on many occasions, this is a highly concentrated revenue stream, with almost 60 per cent of receipts paid by just ten companies. This leaves corporation tax receipts vulnerable to the business decisions of a small handful of highly profitable multinational firms. The exceptional increase in receipts over the last several years is, as a result, subject to extreme potential volatility and is not an appropriate basis on which to build permanent expenditure commitments.
Much of the increase in this revenue stream in recent years is not linked to developments in the domestic economy: this ‘excess’ or ‘windfall’ revenue is likely to be transient. Since Budget 2023, my Department has published a new metric, the underlying General Government Balance, which sets out the fiscal position if estimates of ‘windfall’ corporation tax are excluded.
In 2022, it is estimated that windfall corporation tax amounted to almost €11 billion. For this year, windfall corporation tax is estimated at almost €12 billion. This is around half of the entire corporation tax yield. Driven by windfall corporation tax, a headline General Government surplus of €10 billion is projected for 2023. However, if these receipts are excluded, a significant underlying deficit of €1.8 billion is in prospect for this year.
This is a clear vulnerability in our public finances, and this Government is taking steps to address this risk. €6 billion in windfall corporation tax receipts have been transferred to the National Reserve Fund to help rebuild our fiscal buffers. My Department has also published a scoping paper – Future-proofing the Public Finances – which sets out a number of proposals for a longer-term investment fund. This will enable Government to use some of this windfall to prepare for the structural fiscal challenges on the horizon, including the costs associated with an ageing population. Discussions on the design of such a fund are underway and I intend to bring a proposal to Cabinet in the coming weeks.
Ultimately, however, the best way to guard against fiscal vulnerabilities is by continuing to pursue a sensible and appropriate budgetary policy that is balanced between continued investment in our public services and infrastructure and the long-term sustainability of our public finances. Government will set out the fiscal parameters for Budget 2024 in the forthcoming Summer Economic Statement, which will be published over the coming weeks.