Department of Finance officials told journalists this week that the Government does not know when the party will end on corporate tax receipts, which are expected to boom this year to about €21 billion. Third-quarter exchequer receipts show corporate taxes are up more than 70 per cent so far in 2022.
But the sheer scale of the cash rolling in suggests the Republic may as well be an equity investor in some of the biggest companies in the US, such must be the scale of their individual contributions and the significance of them to the State’s coffers.
The profit warnings this year from giants such as Meta, the owner of Facebook, also show how exposed the State’s revenue base is to a US corporate tech slowdown.
It is a fact that the Republic gets a better ongoing financial return from, say, Meta, than any equity investor. Meta does not pay dividends. Yet it incurred an Irish tax charge in 2020 of €266 million. Its payout to the Revenue Commissioners this year is linked to its 2021 profits, which across the group were about one-third ahead of the previous year. The company’s contribution to the Irish exchequer in 2022 could near €400 million – enough to pay for the entire extra allocation for education in Budget 2023.
But if Meta’s finances continue to slide as they have done throughout 2022, that tax bounty could fall significantly as soon as next year. The even bigger taxes paid here by Apple and Google could shrink likewise.
On the flip side, any tech slowdown may be balanced out, as far as the Irish exchequer goes, by the expected continuance of the strong performance of the more financially defensive pharma sector. Pfizer, whose Covid vaccine is likely to be a blockbuster for years to come, likely pays even more tax here than Google or Meta.
The Government estimates that €8 billion to €10 billion of the corporate tax boom may be vulnerable to a “shock”. But the truth is: nobody knows. About €6 billion of the bounty will be transferred to State reserves by the end of next year. When the party ends, the Government will likely need every cent of it.