Dáil Éireann Debate, Tuesday - 21 May 2024
239. Deputy Bernard J. Durkan asked the Minister for Finance if he remains satisfied that the taxation system in Ireland 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. [22989/24]
Amharc ar fhreagraMy Department publishes the Annual Taxation Report each year to provide a structural analysis of the Irish tax system so as to identify emerging fiscal imbalances.
The latest version of the report, published in 2023, examined vulnerabilities in the corporation tax base, highlighting the concentration of this revenue stream amongst both a small number of firms – with over half the corporation tax yield paid by the top ten taxpayers – and in a small number of FDI-related sectors.
This level of concentration presents a clear risk to the sustainability of the public finances. My Department estimates that just under half of this year’s corporation tax take is windfall in nature i.e. is not linked to the domestic economy and could be transient in nature.
I have stated on numerous occasions that we cannot rely on these temporary windfall receipts to fund permanent increases in expenditure. This would result in a repeat of the mistakes of the past.
Government has taken action to mitigate this risk, by publishing legislation to establish two new long-term funds, the Future Ireland Fund and Infrastructure, Climate and Nature Fund, that will enable us to invest windfall receipts to help part-fund the response to the future structural challenges that we know are on the horizon, including an ageing population and the transition to a carbon-neutral economy. This legislation is currently going through the Houses of the Oireachtas.
However, ultimately, the best way to reduce the risk of an overreliance on corporation tax is to keep public expenditure growth at sustainable levels, which will be achieved by following a balanced and sensible budgetary strategy.
