Corporate tax take likely to evolve from win-win of recent years

An increasingly mature multinational sector, our reliance on a few big companies and changes in global tax rules will all affect future tax revenue

Trying to take the pulse of the Irish economy is often as much an art as a science. So many figures are mangled by multinational accounting that there is a tendency to dismiss GDP data out of hand and to see the volatility of corporate tax receipts as vital for the exchequer, but detached from what is going on in the “real” economy.

But recent months have shown us that multinational profitability is vital and flows through not only to Irish tax returns, but also to employment here.

The mighty relief felt in Government as the November tax returns showed a surprise rebound, leaving the figures on target for the year, will have been tempered somewhat a few weeks later when IDA Ireland reported its annual employment survey of its member companies. It showed a small 0.3 per cent fall in employment to just over 300,500 jobs, the first decline in many years.

The IDA’s project pipeline is still strong, with 248 projects signed in 2023 but the edging down in job numbers, due to a 2.9 per cent drop in employment in the ICT companies it supports, shows that – as they say when advertising investment products – returns can fall as well as rise.


The tax figures and the ongoing strong performance of most of the FDI sector gives cause for comfort. But the trends in 2023 also raise a question. It is whether the period of rapid expansion in the multinational sector here is being replaced by something more, well, ordinary – an increasingly mature sector where growth will be more modest and there will years of “down” as well as the relentless “ups” we have seen in recent years.

After all, despite the November surge, the total corporate tax take this year will be around the €23.5 billion target, itself revised down during the year. This would be less than €1 billion up on 2022. After years of strong overperformance, this is an important signal.

There is a lot at stake. It is worth reflecting that the additional annual corporation tax collected since the middle of the last decade is not far off €20 billion, equal to about one fifth of Irish government spending. The huge revenues that followed the relocation of intellectual property rights here have transformed the Irish exchequer, helped also by the lift in income tax from their well-paid employees and the professional service firms who advise them.

Even over the past couple of years, the growth rate had been extraordinary. “The numbers are stark,” says Peter Vale, tax partner at Grant Thornton. “At end November, corporation tax receipts stood at €22 billion. At the same point in 2021 that figure was €13.5 billion. Go back to 2019 and corporation tax receipts at the end of November were €10 billion. It is growth nothing short of remarkable.”

This is part of the reason why the trends in 2023 are interesting, as it was the year when parts of multinational-land hit some turbulence.

“Weaker exports and investment in 2023 reflected a slowing global economy and are a direct link to the volatility we saw in tax paid here in certain sectors, particularly in pharmaceutical and ICT,” says Gerard Brady, chief economist at Ibec.

“The advent of Covid led to large growth in demand through the supply chain. This trend went into reverse in 2023, as Covid-induced demand returned to normal. Whilst the overall tax take came in on target, the volatility earlier in the year was a valuable warning about the risk from our tax base being so reliant on corporate tax and on the small number of companies who pay the majority of it.”

This pattern of post-Covid reverse in 2023 was most evident in the pharma sector where Pfizer in particular, one of Ireland’s top taxpayers, saw global revenue surge ahead during the pandemic. The decline in demand for Covid vaccines and medicines led to a fall-off in 2023 in profits and – we must assume – in tax payments made in Ireland. Given Pfizer’s corporate calendar, it appears the company was the likely cause of the fall in corporate tax in October.

That said, as pointed out in the recent Central Bank quarterly report, the recent trend in investment in the pharma sector gives some cause for confidence that, for pharma, 2023 was a bump downwards before a return to growth. However, restrictions on computer chip sales to China do give reason for concern about export trends from that sector, which have also been weak in recent months. It is another sign of the relentless growth since 2015 being replaced by a more mixed and nuanced picture. And of course the downturn in the world economy, and in Europe in particular, will also have an impact.

“Weak global demand will have some impact on corporate tax in 2024,” says Ibec’s Brady. But at the same time many big taxpayers are seeing stabilising demand following the correction in supply chains which drove tax volatility in 2023, he said.

The narrow base remains an issue, with the Fiscal Advisory Council calculating that just three companies are responsible for 40 per cent of corporation tax payments.

“The volatility in corporation tax receipts this year reflects this reliance on a small number of companies,” Vale says. “It’s widely believed that the weaker months were linked to some of the larger pharma groups based here, with the upturn in November associated with large tech companies.”

He says: “Fundamentally, it is the profits of certain large multinational groups that has driven the stellar growth in our tax receipts. A global economic downturn in 2024 or simply weaker results from a couple of large groups here could see our corporation tax receipts drop significantly.”

Experience has shown that trying to forecast here is next to impossible, given the range of factors involved. But it does look likely that after an adjustment to a higher trend level, growth in corporate tax receipts could be more modest and there are likely to be years when it falls back.

The reliance on such a small number of very big companies almost guarantees some volatility. The Government is dealing with this by setting money aside in two new funds aimed to help deal with future funding pressure: the details of exactly how these will work are to be outlined in the new year.

Looking at the wider picture, structural factors could play for and against Ireland. The new top-up tax, which will increase the tax rate on big foreign multinationals from 12.5 per cent to 15 per cent will benefit Ireland, though the extra revenue will only flow through from 2026 on.

The other element of the OECD deal, which could threaten Ireland’s revenue by moving the rights to tax some sales to other jurisdictions, has been slow to get off the ground.

Global tax changes that could have siphoned off a portion of our tax revenues have been slow to materialise,” says Vale. “While many countries have introduced unilateral digital taxes, the impact on our corporation tax receipts has been small.”

Meanwhile, he says, there is so far no sign of change in investment behaviour related to these tax changes.

“Of further note,” says Vale, “is that many large groups currently shelter a portion of their tax bill here with tax allowances linked to intellectual property moved here pre-2020. For many, these allowances will shortly expire, which could see tax receipts increase again.”

So there are both opportunities and risks ahead – again a sign that Ireland is moving from having all the wind behind corporate tax revenues to a more mixed picture. And one thing is for sure. The State, as a huge beneficiary from corporate tax revenue, will remain in the spotlight, with a series of barbs in recent weeks after the November figures.

Leading French economist Thomas Piketty has accused Ireland of “siphoning the tax base of others”. A Global Tax Evasion Report 2024 by the Paris School of Economics research body for the European Union (EU) Tax Observatory showed that Ireland earns €4,500 in corporation tax revenue per capita, which is five times the rate of France or Germany and has multiplied fivefold since 2014.

“Ireland attracted attention in the past because of the low tax rate paid by large multinationals based here,” says Vale. “The focus now seems to be on the large corporation tax flows into the exchequer in recent years in particular. If corporation tax receipts remain high, we can expect this focus to remain.”

Whether this focus leads to policy changes to Ireland’s disadvantage remains to be seen.

Cliff Taylor

Cliff Taylor

Cliff Taylor is an Irish Times writer and Managing Editor