Revenue urges caution on tax forecast

The Revenue has told the Government that €300 million of the €2 billion surge in corporation tax receipts this year should be excluded from forecasts for 2016.

The tax authority has told Minister for Finance Michael Noonan that the surge is being driven by a wide range of companies.

In a letter to Mr Noonan, Revenue chairman Niall Cody cited improved trading conditions associated with increased sale of internationally traded products.

Citing engagements between Revenue case managers and companies, he said the impact of currency fluctuations on the taxable profits of some groups was an “additional smaller factor”.

Mr Cody said the final return at the end of 2015 is likely to be “relatively unchanged” from the current level of corporation tax receipts, which were running ahead of target by some €2 billion this month.

The surge has prompted anxiety among economists that this level of payments might not be repeated as corporation tax is a volatile source of tax receipts.

However, Mr Cody said the surplus arises from a number of very large multinationals rather than any one company.

Some €1.2 billion of the surplus came from large groups, with payments in excess of €100 million. Based on information derived from the companies themselves, the tax authority expects much of the surplus will reoccur next year.

“We have informed your Department that it is likely that approximately €300 million for the 2015 surplus from these large groups should not be included in the forecast for 2016, for various sector or company-specific reasons,” Mr Cody said.

Mr Cody’s letter, published on the Department of Finance website, said that about one quarter of the corporation tax surplus was associated with companies whose payments are between €1 million and €100 million.

“As an indicator of the wide range of the increase in tax receipts driving the surplus, it is notable that payments from the non-Large Cases Division companies are growing faster than those from Large Cases Division companies (67 per cent to 61 per cent in the first 10 months of this year compared to 2014),” he said.

“For the most part, corporation tax payments this year reflect preliminary tax for the 2015 tax year. However, relevant tax returns [for] 2015 are not due to be filed until 2016.

“In the absence of the detailed return information, the reasons for the surplus can only be deduced from engagement between Revenue case managers and the companies. “

Revenue’s assumption was that there wasould be no further currency fluctuations or declines in the profitability of the larger corporate groups. Some 80 per cent of corporate tax receipts come from multinationals, Mr Cody said. “Of this, the majority comes forom the ICT and pharmaceutical sectors. It is concentrated: the top ten groups account for over a third of receipts.”