Corporate tax windfall likely to hit €23bn this year, exceeding Government forecasts

Corporate tax receipts for the year are now likely to surpass the Department of Finance’s own bullish forecasts and hit a record €23 billion this year, according to a well-placed source.

Exchequer returns for November, published last week, indicated that the business tax generated a record €21.1 billion for the first 11 months of the year, €7.6 billion ahead of the same period last year.

At the time of the budget in September, the department had forecast that receipts for the full 12 months would be €21 billion.

Insiders now expect the full-year total to be at least €23 billion. This would be nearly six times the level the exchequer typically generated from the tax in the pre-2014 period.

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The department has linked the windfall to increased corporate profitability, rather than the on-shoring of intellectual property (IP) assets as some have maintained.

Minister for Finance Paschal Donohoe has warned that the strength of “potentially volatile” corporation tax receipts was creating “an artificially positive picture of the public finances”.

The department also cautioned that “some of these receipts are expected to be once-off in nature and will not reoccur next year”.

An article in the latest edition of US trade journal Tax Notes predicted Ireland’s corporate tax windfall could climb to €26 billion. It also – like the department – linked the additional receipts to corporate profitability, showing that between 2014 and 2021, changes in the level of corporate tax receipts correlate almost exactly “with changes in the profits of IP-rich tech and pharmaceutical multinationals in Ireland”.

Responding to the latest figures, the Irish Fiscal Advisory Council (Ifac) warned the over-reliance on the potential for corporation tax windfalls each year “needs to be unwound”.

“All the main tax headings are performing strongly. However, corporation tax receipts are responsible for a significant proportion of this over-performance,” it tweeted. It also noted that the budget surplus this year is likely to be bigger than expected.

The Government has been repeatedly warned that with just 10 large multinationals, including Apple, Google and Microsoft, providing more than 50 per cent of receipts, corporate tax poses a serious concentration risk for the public finances. More than three-quarters of receipts last year came from foreign-owned enterprises or multinationals.

Ifac has estimated that as much as 60 per cent of the corporate tax haul take may be “temporary”, meaning it cannot be counted on in the future.

Mindful of this, Mr Donohoe has pledged to place €6 billion of receipts in a new national reserve fund this year and next.

The better-than-anticipated return from corporation tax has allowed the Government spend heavily on cost-of-living measures while simultaneously running a budget surplus.