Minister signals review on sustainability of corporation tax receipts

FF says there are ‘serious questions’ about sustainability of receipts


Minister for Finance Paschal Donohoe has signalled he will review the sustainability of Ireland’s corporation tax receipts in the face of the “volatile” and “spectacular” rise in this revenue stream.

He said during Dáil finance questions there were “things that might benefit our position relating to corporation tax in the future”. But there were also challenges and there was a “shift in the tone of global trade”.

The Minister was responding to Fianna Fáil finance spokesman Michael McGrath who called for an independent external review because of “serious questions” about the sustainability of the corporation tax receipts.

Mr McGrath said that in 2014 €4.6 billion was collected which rose to €6.9 billion in 2015.

Since then the scale of the increase in tax receipts was “quite spectacular”, rising by 50 per cent and last year €10.4 billion was collected.

This was almost €2 billion more than the Department of Finance had forecast and was 27 per cent higher than in 2017.

He warned there was a “key risk for the public finances in making permanent expenditure commitments on the back of what could prove to be a transitory, volatile and temporary tax receipt”.

Mr McGrath said the 2017 report by Séamus Coffey on Ireland’s corporation tax code predicted sustainability over the medium-term based on 2015 figures but a new review was needed because of the dramatic increase in receipts since then.

The Cork-South Central TD said the review should be external to the Department of Finance and he meant “no disrespect to the Minister’s officials”. Mr Donohoe should consult bodies such as the ESRI and the Irish Fiscal Advisory Council, on the best way to go about this.

“It does not need to be a very expensive external professional services firm. There is probably expertise in the State’s ambit and we should consult those bodies on precisely what we need to examine.”

The Minister said he would “figure out if there is a way by which we can address the need for the review that the Deputy has made this morning” and would work with Fianna Fail to do this.

Mr Donohoe added that Ireland’s determination to protect the 12.5 per cent corporation tax policy as other countries debate tax policy “could offer the potential for the progress we have made in corporation tax receipts being sustained into the future”.

But some key corporate sectors in the global economy which had performed very strongly in recent years were now experiencing challenges with a change in the tenor of global trade.

He was aware of the risks and that was why the Vat rate in the hospitality sector and stamp duty on commercial property had been changed.

But he said “I have yet to face any Deputy in this House who argues that I should spend less. It is my job to manage that balance.”