Dáil Éireann Debate, Thursday - 1 February 2024
235. Deputy Bernard J. Durkan asked the Minister for Finance whether he remains satisfied that the taxation system in this country is sufficiently broadly based to avoid dependency on any one sector to such an extent that it might become a threat to the economy; and if he will make a statement on the matter. [4874/24]
View answerMy Department publishes the Annual Taxation Report to provide a detailed analysis of the Irish tax system, with the objective of monitoring developing trends in tax revenue to minimise fiscal vulnerabilities.
The latest Report, published last year, highlights the high concentration in the corporation tax base, with ten firms paying nearly 60 per cent of corporation tax receipts in 2022. Irish Fiscal Advisory Council analysis suggests that as few as three payers account for one-third of receipts.
The corporation tax base is not only reliant on a small number of tax payers but is also concentrated at sectoral level with a small number of highly profitable sectors i.e. pharmaceutical, manufacturing and ICT driving a large proportion of the growth seen in recent years.
The concentration of corporation tax receipts among a handful of large payers, as well as a small number of sectors, presents a clear vulnerability to our public finances. My Department estimates that around half of the corporation tax yield last year was ‘windfall’ in nature, in other words it is not linked to the domestic economy and could be transient.
This is a risk about which I have cautioned on numerous occasions. I have stated many times that given the degree of concentration in our corporate tax base, and the associated volatility of these receipts, we must not rely on temporary windfall tax revenues to fund permanent increases in expenditure. To do so would be to repeat the mistakes of the past.
That is why this Government has taken action to mitigate the exposure of our tax base to volatile windfall revenues, announcing the establishment of two new long-term funds, the Future Ireland Fund and the Infrastructure, Climate and Nature Fund, that will invest windfall receipts to help fund the response to future structural fiscal challenges that we know are on the horizon.
Ultimately, the best way to ensure the sustainability of the tax base over the medium term is by continuing to pursue a balanced and sensible budgetary policy.
