Exchequer returns for August showed another strong month of corporation tax receipts. The State received €1.04 billion in corporation tax receipts last month, some €800 million higher than had been expected.
This was due to a “number of payments from some large companies”, mainly in the tech sector, “which may reflect increased sales arising from the pandemic”, the Department of Finance said.
“It is not expected that such high receipts will be repeated in future years,” the release from the Department added, without offering an explanation for this statement.
In the year to date, corporation tax revenues have totalled just more than €7 billion, some 14 per cent ahead of profile and higher than the same period last year by €524 million. In 2020, corporation taxes generated a record €11.8 billion for the State, with this figure looks set to be exceeded this year.
This stellar performance came in the same week that Central Bank of Ireland governor, Gabriel Makhlouf, warned in a pre-budget letter to Minister for Finance Pashcal Donohoe of the dangers of allowing higher levels of public spending to occur at a time when there could be a permanent reduction in our corporation tax receipts.
This could increase our debt ratio, which is already “among the highest in the developed world”, Mr Makhlouf said.
The warning on corporation tax is a reference to the global process being run by the OECD, including a proposal to introduce a minimum effective tax rate for big companies of at least 15 per cent. Ireland declined to sign up to this initial draft in July.
The Government has estimated that the new global corporation tax regime could reduce our receipts by €2 billion a year.
In his letter, Mr Makhlouf also noted that the Government’s recent Summer Economic Statement envisaged a sequence of much bigger deficits between now and 2025, culminating in a budget deficit of €7.4 billion in 2025.
In his reaction to the exchequer figures, Mr Donohoe said: “The best form of defence against the potential reduction in corporation tax is to reduce the deficit.”
How he will make the arithmetic of all this will work is not clear, but Makhlouf and others will no doubt be hoping for some clues in next month’s budget.
