Corporation tax receipts are likely to be higher than expected this year, the Minister for Finance Paschal Donohoe has indicated, significantly improving the exchequer's end of year position.
Halfway through the most important month of the year for corporation tax, Mr Donohoe on Tuesday told TDs that receipts were continuing to grow strongly and would outstrip forecasts. Receipts at the end of October were more than 10 per cent ahead of expectations and that trend is continuing.
But the corporation tax base is highly concentrated. Ten firms now account for almost half of all receipts, Mr Donohoe said.
He was speaking during an appearance before the Oireachtas budgetary oversight committee at Leinster House this afternoon.
He said that he expects corporation tax revenues to rise again next year before plateauing in 2021 and then entering a period of decline, under pressure from the OECD reforms of multinational taxation, pressure on the profitability of major companies and likely changes to the corporation tax rates in neighbouring jurisdictions.
Extension boost
Sources said later that the Government expected a post-Brexit UK to reduce its rates of corporation tax rates.
Mr Donohoe also said that the extension of the UK’s date for leaving the EU until January would result in a better end of year position for the exchequer, and that the public finances would see a Brexit boost next year if the UK leaves with the deal negotiated last month.
“The risk of the UK departing the EU without a deal has been averted for now. However, the ultimate outcome is still uncertain and a disorderly Brexit is still possible,” Mr Donohoe told the committee.
“The extension of the Article 50 exit means that there is likely to be some upside to my Department’s forecasts. Indeed, if the withdrawal agreement is ratified, Ireland’s position will, inter alia, improve with increased revenues and lower expenditure than forecast in Budget 2020,” he said.
If there is an orderly Brexit, Mr Donohoe said GDP could grow by around 3.1 per cent next year and he could deliver a budget surplus of 0.5 per cent in such a scenario.
Mr Donohoe also said that it Ireland’s fiscal position for 2019 could be better than the 0.2 per cent budget surplus forecast a month ago due to the “distinct possibility” of stronger than expected corporation tax receipts.
Mr Donohoe also brought the supplementary estimates – spending top-ups - through Cabinet today, approving extra funds for departments which have exceeded their budgets.
However, the largest supplementary, for the Department of Health, has not yet been considered by the Cabinet.
