No let-up in corporate tax bonanza
Cantillon: Exchequer accounts show corporate tax revenue €1bn ahead of forecasts
Minister for Finance Paschal Donohoe: it could be a while before the Government generates an unexpected €6 billion in tax like it did between 2015 and 2018. Photograph: Conor McCabe
The Government’s corporate tax boom just got boomier. The latest exchequer numbers show the Government netted €6.7 billion from the business tax in the first 10 months of this year, more than €1 billion ahead of forecasts.
The €1.5 billion collected in October seems to be connected to a change in international accounting rules, relating to when firms are obliged to recognise revenues, and relate to customer contracts of licences. There is speculation that one Irish-based software multinational generated most of the additional money for the exchequer.
The extra funds are helping the Government pay for spending increases. The latest figures show net voted expenditure is already up 9 per cent or €3.3 billion this year. They will also be used to mop up budgetary overruns in health, a perennial flashpoint for the Government.
If the crash represented a perfect storm for the Irish economy, the current phase must be classified as something of a sweet spot. Employment-rich growth is bolstering incomes and boosting domestic demand while buoyant corporate profitability and low interest interests are generating a tax windfall for the exchequer.
Health and housing
On a macro and tax level, we’ve probably never had it so good. That’s not to say the State faces significant challenges, none more so in the areas of health and housing. But it may be some time before the Government generates an additional and unexpected €6 billion in tax like it did between 2015 and 2018.
The dividend was due to the aforementioned windfall in corporate tax and a lower interest rate bill on the State’s national debt.
Unfortunately nearly all of it has been swallowed up in spending hikes needed to maintain the existing level of public services.
But what will happen when this dries up? Higher interest rate costs and a negative shock to corporation tax are almost a given – combine that with a messy Brexit and we could find ourselves back in the austerity camp.