Dáil Éireann Debate, Thursday - 16 June 2022
24. Deputy Dara Calleary asked the Minister for Finance if he is concerned that the public finances are forecast to remain heavily reliant on corporation tax receipts; and if he will make a statement on the matter. [30074/22]
Amharc ar fhreagra50. Deputy Richard Bruton asked the Minister for Finance the latest appraisal of the reliability of corporation tax receipts; and if he will make a statement on the matter. [31244/22]
Amharc ar fhreagra58. Deputy Ged Nash asked the Minister for Finance if he is concerned at the warnings from an organisation (details supplied) of an over-reliance on corporation tax receipts; if he will outline his strategy to reduce this over-reliance; the way that he plans to broaden and sustain the tax base; and if he will make a statement on the matter. [31011/22]
Amharc ar fhreagraI propose to take Questions Nos. 24, 50 and 58 together.
I am concerned about the exposure of the public finances to corporation tax receipts.
There are two issues: firstly, concentration risk and, secondly, international corporate tax policy changes.
In relation to concentration risk, the latest data show that around €1 in every €8 collected arises in just 10 large corporate tax payers. This concentration means total tax receipts are vulnerable to the business decisions of a handful of large companies.
In relation to policy, as has been well articulated over the past few years, changes to the international tax regime represent a key risk to this revenue stream. My Department’s central estimate at present is that €2 billion could be lost in corporate tax by 2025 relative to baseline. I would stress that there is significant uncertainty attached to this technical assumption; the final figure could be considerably different.
Of course, the strong growth in corporation tax that we have seen over the last several years is, in many respects, welcome. It meant that, during the pandemic, we had to borrow less than would otherwise have been the case. It is also a reflection of the success of our industrial policy in attracting high quality multinational firms and high wage jobs to Ireland.
While the revenue stream is indeed welcome, we must be careful not to craft budgetary policies on the basis of these highly volatile and unpredictable corporate tax receipts. As a result, Government has frequently cautioned against building permanent expenditure commitments on the basis of corporation tax receipts.
It is also worth pointing out that with borrowing costs rising, our capacity to absorb a shock to corporation tax receipts is more diminished. This further enhances the need to reduce our exposure to this revenue stream.
Finally, last year I established the Commission on Taxation and Welfare to analyse the structure of our public finances and to propose reforms to ensure the long-term sustainability of our tax and welfare systems. The Commission is due to report next month on how to best address vulnerabilities in the tax base to ensure that we are in a position of strength to address any future economic shocks that may occur.
