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Is Apple behind latest drop in corporation tax?

Sharp fall-off in receipts in March might - according to insiders - relate to tech giant reassessing its tax liability here

A 25 per cent drop in corporation tax receipts in the first quarter, detailed in the latest exchequer returns for March, underscored what Minister for Finance Michael McGrath said was “the inherent unpredictability” of the business tax.

It drew in a record €23.6 billion last year against expectations that 2023 would finally puncture Ireland’s winning streak, and against a backdrop of slowing global growth.

McGrath appeared to double back on his “unpredictability” caveat by confidently forecasting the first quarter shortfall would “be made up later in the year”.

Does he know something we don’t?


We’ve been warned – for perhaps a decade now – that because the State’s corporation tax base is heavily concentrated around a small number of companies, it is potentially volatile and shouldn’t be tied into day-to-day spending.

According to a recent report by the Parliamentary Budget Office, it is “probable” that two or more firms are individually paying more than 10 per cent of receipts, posing a significant risk to the public finances.

The “receipts may go down as well as up” warnings are, however, something of a hard sell when the pot keeps getting bigger.

Corporation tax has grown from just €3.5 billion in 2011 to more than €23 billion last year.

Either way, both Department of Finance officials and the Minister for Finance seemed nonplussed by the latest quarterly drop, linking it “to timing issues”.

Insiders speculate that the fall-off may be linked to a slide in Apple’s taxable profits.

The iPhone maker is relatively unique in having a financial year ending in September, which means the company makes a half-year tax payment to Revenue in March based on what it thinks it will have to pay for the full year ending in September.

This can be made in one of two ways.

The company in question can pay 50 per cent of the previous year’s tax bill on the assumption it will be liable for a similar amount in the current year or it can pay 45 per cent of a new projected profit level on the assumption things have changed.

The speculation is that Apple has taken the latter option, projecting lower taxable profits here on the back of a decline in sales or perhaps because it can shelter a greater percentage of profits for whatever reason.

It’s hard to reconcile such a plunge in receipts in the month of March – they fell (in year-on-year terms) by almost 29 per cent or €742 million – without relating it to Apple.

The Minister was again warning about a potential slide in this vital revenue source last week when commenting on Central Statistics Office figures showing the Government generated a healthy surplus of €8.3 billion last year.

“It is important not to lose sight of the fact that at least part of the surplus is due to the strength of corporation tax receipts, some of which is likely to prove windfall in nature,” he said.

“While our headline position is strong, this can change quickly given the inherent volatility in our corporation tax receipts and the dependence we have on revenues from a small number of multinational companies.”

McGrath has a difficult communications task around corporation tax. Domestically, he must temper expectations that there’s a reservoir of cash ready to be accessed by departments or for tax cuts ahead of an election. Removing €6 billion a year in two State savings funds could be difficult to justify if things get tight and there’s nothing stopping future administrations from halting payments into these funds.

Internationally, he must also tread with caution. Ireland has been given a hard time about its low corporate tax rate. It’s been tagged in some quarters as a tax haven for facilitating aggressive tax planning by multinationals.

The adoption of a global minimum rate of 15 per cent – under the OECD’s Beps (base erosion and profit shifting) process – has neutralised this attack.

But if Ireland’s corporate tax pot expands significantly under a new global minimum rate the State could encounter further bad press, particularly from EU allies, which are still threatening to adopt a digital tax if tech firms continue to avoid tax on a grand scale.

And there are two reasons why Ireland’s strong corporate tax position is likely to get stronger.

First, the headline rate for big multinationals is going up from 12.5 per cent to 15 per cent. Companies are liable from this year but will only start making the additional payments from 2026 onwards. This, combined with the exhaustion of certain capital allowances, could trigger another surge in receipts.

The Government might be secretly happy to shed some of those receipts under Pillar One of the Beps process – which aims to give bigger countries more taxing rights (a move that will hit Ireland) – so as not to draw the ire of peer countries already disgruntled at Ireland’s advantageous position.