Sir, – Eoin Burke-Kennedy is, I think, quite right to suggest that recent corporation tax windfalls should be seen as Ireland's version of Norway's North Sea oil (Business, Opinion, ,April 18th). But I think it is instructive to bring the United Kingdom into the conversation.
The North Sea oil boom of the 1980s produced massive exchequer windfalls for Norway and the United Kingdom. Norway used its windfall to create one of the world’s largest sovereign wealth funds or rainy-day funds. Britain squandered its windfall on expenditure programmes which were popular but which did not create any substantial long-term benefits.
UK oil and gas revenues fell from £10.6 billion in 2008-09 to £0.6 billion in 2019-20. The revenues have largely dried up and the legacy is committed expenditures which now have to be funded from other sources.
Corporation tax is our North Sea oil. Before the crash, it was yielding about €6 billion per annum. In the four years from 2010, annual corporation tax receipts were at or around €4 billion. The annual yield was about €7 billion to €8 billion between 2015 and 2017, and in the four most recent years was €10.4 billion, €10.9 billion, €11.8 billion and €15.3 billion.
In the seven years from 2015 to 2021, Ireland collected about €43 billion more than would have been yielded had corporation tax receipts remained at their post-financial crash level, and about €30 billion more than the pre-crash level of receipts. That was our windfall and would have seeded a decent rainy-day fund. But, because our feckless politicians followed the UK and not the Norwegian model, we blew it.
Why are our politicians condemned to repeat their own most egregious errors? The Taoiseach was a member of the government which ignored warning after warning that windfall property tax receipts should not be used to pay for ongoing current expenditure commitments. Our current Minister for Finance takes the precaution to warn us that the yield from corporation tax may be volatile and unreliable. But “I told you so” will not play when his warnings are shown to be prescient. We need him and the other three most senior members of the Cabinet to do something about it.
Paschal Donohoe concluded his review of "In Defense of Public Debt" with the observation that he fully agrees with the conclusion of the book that "governments should run budget surpluses and retire debt in good times so that they can run deficits and issue debt when the need arises" (Books Reviews, 8January 8th).
Many of your readers will agree, whether their supporting authority is Genesis 41.30 or Keynes 1.01. But few enough of them will become Minister for Finance and have the opportunity to put theory into practice. Through the years of plenty we ran one small and unbudgeted surplus in 2018, which was no more than a rounding error in the national accounts. – Yours, etc,
PAT O’BRIEN,
Dublin 6.