Dáil Éireann Debate, Thursday - 5 October 2023
88. Deputy Colm Burke asked the Minister for Finance the amount the State has taken in for tax receipts for income tax, corporation tax and VAT to date in 2023; and if he will make a statement on the matter. [43078/23]
View answer92. Deputy Cathal Crowe asked the Minister for Finance if he will report on corporation tax receipts to for the first three quarters of 2023; and if he will make a statement on the matter. [42878/23]
View answer125. Deputy John Lahart asked the Minister for Finance if he will provide an overview of the trends in corporation tax receipts in the recent past. [42890/23]
View answer126. Deputy Cathal Crowe asked the Minister for Finance his assessment of Exchequer returns for the first three quarters of 2023; and if he will make a statement on the matter. [42879/23]
View answer134. Deputy Richard Boyd Barrett asked the Minister for Finance if he will provide an update on his Department's latest projections for windfall corporation tax revenues; the possible uses for these revenues that he is considering in budget 2024; and if he will make a statement on the matter. [43152/23]
View answerI ask the Minister to outline the tax receipts for income tax, corporation tax and VAT to date in 2023 and to make a statement on the matter.
I propose to take Questions Nos. 88, 92, 125, 126 and 134 together.
The Exchequer returns to the end of September this year showed an overall surplus of €1.1 billion. This compares with a surplus of €7.9 billion at end of September 2022. The bulk of the deterioration was driven by the transfer of €4 billion to the National Reserve Fund earlier this year.
Overall, tax revenues to the end of September stood at €61.4 billion, €3.5 billion or over 6% ahead of the same period last year. This has been driven by income tax, VAT and corporation tax.
On income tax, receipts of €23.1 billion were up by €1.8 billion, or over 8%, remaining ahead of target and reflecting the strength of a labour market that is at full employment.
VAT receipts to the end of September are up by €1.5 billion, or over 9.5% on 2022, reflecting continuing resilience in consumption.
Corporation tax receipts of €14.4 billion to the end of September are ahead of the same period last year by €600 million or 4.4%, but are significantly behind target. Since 2015, corporation tax receipts have increased substantially. Last year, corporation tax receipts stood at €22.6 billion. This represented a more than doubling of 2019 receipts and a more than fivefold increase on the position a decade ago, with corporation tax surpassing VAT for the first time to become the second largest source of taxation revenue.
Certainly, these receipts are welcome. They reflect positively on Ireland as a leading destination for highly profitable multinational firms. However, as the Deputy will recall, I have frequently warned of the risks around corporation tax. These revenues are built on an extremely narrow tax base, with just ten firms accounting for well over half of all receipts. This means that this tax head is vulnerable to the business decisions of a small number of multinational companies and is subject to exceptional potential volatility. The exceptional volatility of this tax head has been particularly evident over the last two months, with sharp declines in corporation tax receipts recorded. Corporation tax is now €700 million behind profile for the year. This is a clear demonstration of the dangers of relying on volatile tax revenues to fund permanent spending.
A significant proportion of the current corporation tax yield is estimated to be windfall in nature, in other words, it is not linked to the domestic economy and could prove transient. At the time of the stability programme update in April, windfall receipts this year were estimated at around half of the entire corporation tax yield for the year. My officials will be revising this estimate, taking into account the latest available information, as part of the fiscal projections published next week in the budget.
The Government has regularly warned that corporation tax is not a suitable base for permanent expenditure commitments and is mitigating the exposure of our public finances to this revenue stream. This is why we set up the National Reserve Fund and put €6 billion of windfall receipts away. In addition, €2.25 billion in windfall receipts will also be made available over the period 2024 to 2026 to fund capital projects. This will allow us to take advantage of these temporary receipts to build long-lasting improvements to our society and economy. Work is also under way on proposals for a long-term savings fund which will invest these receipts to help fund part of the future costs of structural change, particularly the costs associated with an ageing population, and the climate and digital transitions.
Ultimately, however, the best way to mitigate the risk of an over-reliance on corporation tax is by continuing to pursue a sensible budgetary strategy that keeps expenditure growth at sustainable levels. We must also continue to run budgetary surpluses. I believe that the fiscal parameters we have set out in the budget strike the appropriate balance, giving Government the scope that we need to address the challenges of today, including providing support to address the cost-of-living challenges, supporting the vulnerable, assisting and encouraging enterprise, and continuing to invest in our public services while also ensuring that our public finances remain on a positive trajectory over the medium term.
Is the increase in income tax receipts a reflection of the increased number of people in employment? I understand that approximately 80,000 more people are in employment compared with this time last year. Alternatively, is it a reflection of increases in wages and salaries?
VAT receipts have increased by 9.5%. Is that a reflection not necessarily of an increase in the volume of sales of goods and services delivered but an increase in the prices being charged because VAT automatically goes up if the cost of goods has increased? Has any analysis been done on that?
The year-to-date receipts of income tax are at €23.1 billion compared with a performance last year of €21.4 billion, meaning it is up by over 8% year on year. However, when compared with the profile or the estimate of what we thought we would collect to the end of quarter 3, it is only ahead of it by about €145 million, or 0.6%.
As the Deputy said, VAT receipts are up by almost 10% year on year. However, again it is actually below profile by just over €100 million, or 0.6%.
The Deputy is precisely right on what is driving those receipts on the income tax size. It is a function of the number of people in work and also a function of rising incomes. When it comes to VAT, of course, it is a function of the volume of activity across the economy. There is certainly also a value consequence as prices increase and we have seen significant inflation. Of course, that is the final part of any bill layered on top. As a consumer tax, it reflects and takes account of the inflation that our economy has experienced recently.
I am not sure if the Minister saw the student protests yesterday but the slogan they had was "It's raining now" - I think it is raining right now. In other words, there is no excuse for the Government not acting to protect people from the cost-of-living crisis and the housing crisis at a time when there is a very significant surplus. There is no excuse whatsoever and that is the message that will be heard loud and clear from the Cost of Living Coalition protest at 1 o'clock this Saturday on Parnell Square.
We were the ones pointing out that relying on Ireland's model as a corporate tax haven and big corporation tax receipts is not a sustainable model; I agree entirely. However, the question is whether to use those windfalls now to invest in capital expenditure by building a State construction company and investing in climate adaptation, such as retrofitting, solar panels, renewable power and so on. We should make capital investment but, in doing so, shift our economy onto a different track.
The Deputy is very quick to advise us how to spend the surpluses, but he pays very little heed to why we have surpluses. It is due to the enterprise model that Ireland has successfully developed over many decades, our commitment to European Union membership and the euro, political stability, and successive governments running pro-enterprise business policies and implementing such policies.
The debate does not start with "What do we do with the surpluses?" It is "Why are we in the position that we are in today?" as an outlier in European Union terms, on the positive side, because we have such surpluses. Of course it gives us policy choices but as we said in the summer economic statement, there was 6.1% expenditure growth on core expenditure and an additional non-core expenditure of €4 billion. We have committed an extra €250 million to the public capital programme next year which will already be in excess of €13 billion. That is high in European terms, and rightly so, because we have to build the homes that our country needs and invest in education, transport infrastructure, healthcare infrastructure and energy infrastructure. We will set out on budget day what our plans are for the surpluses that, thankfully, we are enjoying because it gives us policy choices into the future which include spending more on capital infrastructure. However, it also has to involve providing for the future. Otherwise we would be consigning the students who are protesting now to much higher taxes in a decade or 15 or 20 years' time when the demographic changes really begin to bite.
I agree about providing for the future. However, providing for the future means getting off the current tax haven model. It is not a sustainable model because we can be undercut by anybody else. Onshoring could happen in the US. At a certain point in time the corporate tax revenue will collapse. The question is now, to use the revenues that we have to invest, to have public investment in the key challenges we face in terms of the housing crisis and the climate crisis. The Minister wants to have a debate about why we are in the position we are in today. Absolutely, I want to debate how it is that we are one of the richest countries in the world in GDP per capita terms and yet one in ten families is reliant on food banks to feed their children. How do we have almost 4,000 children homeless in this State? How are we missing all of our inadequate climate targets? How is that? The answer is because the Government is run in the interests of very few, those at the top, those who pay very little tax in percentage terms.
I will let Deputy Burke in and then the Minister can answer both.
The Minister outlined the issue in regard to the concerns about the corporate tax not returning as much as was originally planned. In regard to planning for the next 12 months, do we need to make sure that we plan carefully for that? Is there an expectation that all the larger companies in Ireland, and indeed all the companies here, are continuing to grow? They are continuing to employ more people therefore their turnover will increase. Should we presume that this will now stabilise rather than reduce?
I thank the Deputy. We will lay out next Tuesday what our forecasts are for corporation tax receipts and indeed receipts under every other tax head for the next number of years. That will be the considered view of my Department as to what we expect to receive over the coming years. Deputy Burke is right that these companies that contribute the vast bulk of our corporation tax receipts have substantial operations in Ireland. Industrial Development Authority, IDA, clients now directly employ in excess of 300,000 people at this point in time and many more people indirectly. Earlier this week we had a succession of very positive jobs announcements for Ireland because we are a country that is pro-business, because we welcome capital and investment and job creation in our country.
In reply to Deputy Murphy, we are investing more in public capital. It will be more than €13 billion next year. There are capacity constraints. If we were to add many billions more in a short period of time you would not get value for money first of all, and there are constraints in planning, in housing and in labour and we have to address all of those through reforms and in some instances through investment as well. Ireland is not a tax haven. Ireland is part of a global initiative to reform the operation of corporate tax and we are implementing pillar 2 of the OECD agreement in the Finance Bill later this year. I look forward to the Deputy's engagement and participation in that. Ireland is at the table now, directly negotiating, influencing and shaping pillar 1, which deals with the potential reallocation of taxing rights in respect of the profits of global multinational corporations. We are very much part of a global effort to address the issue of how we tax corporate profits into the future. We have, up to now, introduced and implemented a whole range of reforms across corporate tax.
