What makes it worrying for the longer term is that there is a high level of dependence on the multinational sector for these (corporation tax) receipts – and on a very small number of companies at that.
IF we are to avoid history repeating itself in a bad way, it is timely to review our tax receipts and assess their sustainability so that our economy is better positioned to ride out any downturn that is likely to happen in the future. The Celtic Tiger economic boom of the first decade of this century was fuelled by stamp duty revenues from property transactions, when our banks were doing a lot of reckless lending, driving prices through the roof, before the inevitable crash in the market arrived and the bubble burst.
Everybody in the country suffered financially to some degree – some more than others – and the full fall-out from the downturn has not been dealt with yet despite five good years of economic recovery. Corporation tax has now taken the place of stamp duty and is not necessarily sustainable.
In 2014, the government collected €4.6bn in corporation tax and this has more than doubled to €10.4bn in 2018, almost €2bn higher than the Department of Finance had forecast at the start of last year. Fianna Fáil spokesman on Finance, Cork South Central TD Michael McGrath, has wisely sounded the alarm bells, saying: ‘It is clear that corporation tax receipts are booming. While this is obviously good news for the exchequer, it also now represents a key risk for the public finances.’
What makes it worrying for the longer term is that there is a high level of dependence on the multinational sector for these receipts – and on a very small number of companies at that. Therefore, it is good to note that Minister for Finance Paschal Donohoe has given a commitment to Mr McGrath to review the sustainability of Ireland’s corporation tax receipts as it is clear that we cannot afford to repeat the mistake of putting all our eggs into the one basket.