So much for fears the corporation tax bubble had burst. The latest exchequer returns bulldozed through a raft of predictions that November would signal a major reversal in receipts and warnings from ministers that we were at a “moment of change”.
Instead the business tax generated a record €6.3 billion, €1.3 billion ahead of the same month last year. It brought corporate tax receipts for the year to date to €22 billion and – with one month to go – on course to exceed the Government’s full-year forecast of €23.5 billion.
The €1 billion plunge in October’s corporation tax figure, coming on the back of declines in August and September, appeared to tally with a fall-off in earnings across the pharma sector.
Pfizer last month said it was cutting 100 jobs at its Newbridge manufacturing plant in Co Kildare as part of a restructuring linked to a fall in demand for Covid-19 vaccines and other treatments.
However, the other side of Ireland’s multinational pie the tech sector, appears to have picked up the slack. The strong tax receipts in November were linked to better-than-expected earnings estimates from Meta, Google, Intel and others, which account for the lion’s share of receipts.
“These exceptional corporation tax receipts most likely reflect the strong performance of the technology sector, which this year has significantly outperformed the pharma sector, with the latter having enjoyed a boom during Covid,” Paschal Comerford, tax director at Grant Thornton Ireland, said.
At the time of the budget, the Government forecasted a budget surplus of €8.8 billion this year
Minister for Finance Michael McGrath tried to manage expectations, a difficult task in the face of such a winning streak. “While corporation tax is now 4 per cent ahead of 2022, it is clear that the era of persistent over-performances is coming to an end,” he said.
We will have to reach a tipping point sooner or later but for now Ireland’s tax boom continues.
It has repeatedly defied the negative tax haven headlines and changes to the international tax landscape, ones that were initially perceived as setbacks for Ireland, including the ending of the so-called “double Irish” scheme; the clampdown on multinational tax avoidance; the European Commission’s €13 billion Apple tax ruling; and US tax reforms in 2017.
These events haven’t diminished Ireland’s attractiveness nor stopped the onshoring of billions of euros of assets here nor prevented business tax receipts themselves rising to a record €22 billion.
Even new OECD (Organisation for Economic Co-operation and Development) rules establishing a minimum 15 per cent tax rate for big multinationals coming in next year, are likely to boost revenues at least in the short term. And the other pillar of the OECD’s reforms, the reallocation of taxing rights in favour of bigger countries (which will definitely impact negatively here) remains mired in disagreement.
November’s corporation tax receipts combined with robust income tax and VAT receipts, a reflection of a still strong domestic economy, leave the public finances in rude health and provide something of an early Christmas present for the Coalition.
At the time of the budget, the Government forecasted a budget surplus of €8.8 billion this year, a target that could now be eclipsed, leaving potentially more resources for Minister McGrath’s new savings funds.
- Our In The News podcast is now published daily – Find the latest episode here