THINGS could hardly be going better for the government right now with the recent unanticipated, but welcome surge in corporation tax receipts; it’s like all their Christmases have come together. This windfall took even our economic gurus by surprise, so much so that they were at a loss to explain how it came to pass and why they did not foresee it, as borne out by the secretary general of the Department of Finance, Derek Moran, with his extraordinary admission to the Dáil Public Accounts Committee that ‘the Department is flying blind on this one,’ which does not exactly inspire confidence in those who are at the helm there.
Ending up with almost €2.5bn more in corporation tax receipts is a welcome boost to the State coffers, but this money must not be wasted and certainly should not be used for spreading more largesse in order to buy votes ahead of the forthcoming general election. Ministers Michael Noonan and Brendan Howlin, who have political control of the purse strings, have promised that the money would be used prudently, but did not specify how exactly. Should it be used for paying down some of the national debt or be put into the health or housing sectors which need huge investment after years of neglect?
Whatever choices are made, the government should treat such a windfall with great caution, given past experience of over-reliance on revenue from stamp duty from buying and selling property, which dried up the minute the housing market collapsed seven years ago. Corporation tax revenue is also subject to fluctuation and, if the euro strengthens against other currencies, exports could slow down and, with that, the profits of the many companies in the sector who are driving our current extraordinary rate of economic growth.