Corporation tax from the 10 biggest contributors in the State jumped to €13 billion last year, or 57 per cent of the record €22.6 billion collected by the Government, further concentrating the State’s reliance of a few big businesses and leaving it vulnerable to sudden shifts in industry trends and macroeconomic conditions, new data from the Revenue Commissioners has confirmed.
The top 10 contributors had accounted for 53 per cent of business tax receipts in 2021.
Minister for Finance, Michael McGrath, warned on Wednesday that the “extraordinary growth” in the Government’s corporate tax take, which ballooned by 48 per cent last year from 2021, coupled with the increasing concentration among a small number of companies, requires “a careful policy response”.
Mr McGrath said a new rainy day fund is required, in addition to the National Pension Reserve Fund, to “meet the costs of an ageing population and other pressures”. He said that the “standstill costs of running the State” will require an additional €7-8 billion each year from 2019 levels. The Minister said he will bring forward a “scoping paper”, setting out “in broad terms a proposal to establish a longer term savings fund to meet future expenditure needs”.
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Mr McGrath said with the receipts under the tax head expected to swell again in 2023 to €24.3 billion, the Government must be extremely cautious about relying on these receipts to fund permanent spending.
“My department estimates that around €12 billion – half of the receipts – are windfall in nature and cannot be relied upon in the future,” he said. “We have to avoid the mistake of building up permanent expenditure and taxation commitments on the back of receipts that could prove to be temporary. To make such a mistake would be to expose taxpayers, and the sustainability of our finances, to unnecessary and unacceptable risk. A shock to corporate tax receipts would have serious repercussions for the public finances. Even in the absence of a shock, structural changes to the economy mean serious expenditure pressures are building up.”
The minister told The Irish Times earlier this month that the State took in €3.239 billion in corporation tax receipts in the first three months of the year, compared to €1.889 billion for the same period last year, a 70 per cent increase year on year. He said he expects this pattern to be maintained throughout 2023.
The windfall from this tax heading funded much of the once-off cost-of-living packages unveiled by the Government on budget day last year and in the spring of this year.
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Revenue’s annual report for 2022 indicates that the tax authority collected €118 billion in total taxes last year, including €22 billion in non-exchequer receipts. Net exchequer receipts increased by 22 per cent or €14.9 billion from 2021.
“Despite the challenging business environment, overall timely compliance rates remained strong across all taxes for 2022,” Revenue chairman, Niall Cody, said. “This reflects the positive engagement by businesses, individual taxpayers and tax practitioners with tax compliance obligations and with Revenue during the year and the importance that society generally places on a strong culture of voluntary compliance.”
The tax authority also began a phased return to standard non-warehoused debt collection after two years of forbearance beginning at the outset of the pandemic in March 2020.
Revenue Commissioner Ruth Kennedy said: “Our approach has regard to circumstances where taxpayers or businesses may continue to experience demonstrable cash flow difficulties impacting either their ability to pay non-warehoused debt or their ability to meet ongoing tax obligations on a timely basis.
“In such circumstances, it is critical that taxpayers engage with us at the earliest opportunity and work proactively with us to put in place an agreed payment solution, thereby preventing the need for enforcement of the debt.”
