Minister Donohoe welcomes publication of Corporation Tax Paper

corporation tax receipts increased to over €10 billion last year, nearly a fifth of all tax income, with annual growth rates of close to 20 per cent on average since 2014
a portion of the increase in CT receipts in recent years was ahead of budget day projections
this paper highlights the marked rise in both CT receipts and corporate profitability and the concentrated nature of receipts among a number of key multinationals
most of the CT outturn can be accounted for by underlying macroeconomic variables using a suite of economic models and specialist in-year knowledge and judgement
there are a number of policy implications particularly the merits of applying an extra degree of caution in fiscal planning. In this regard, it is important that the Government continues to strengthen the public finances and runs surpluses into the future to ensure appropriate buffers are in place in the years ahead

The Department of Finance today (Friday) published a technical paper on Corporation Tax, titled Modelling Recent Developments in Corporation Tax . The paper is authored by economists within the Department, Gerard McGuinness and Diarmaid Smyth.

The paper focuses on recent trends in corporation tax (CT) revenues, noting the significant increase in recent years, reaching €10.4 billion in 2018. Since 2014, receipts have grown by close to 20 per cent on average per annum. As a result, the share of the exchequer tax take accounted for by CT reached an historic high of 19 per cent last year. A portion of this increase was ahead of budget day projections, particularly in terms of one-year ahead forecasts.

The paper looks in detail at CT developments, from both a micro- and a macro-economic perspective with several important findings. Using a suite of models, the paper finds that most of the CT outturn in 2018 can be accounted for by economic data, specifically corporate profitability and economic growth more generally.

The marked rise in CT receipts and corporate profitability is highlighted, as is the concentrated nature of revenues amongst a number of key multinational dominated sectors, specifically pharmaceuticals, technology and finance. These account for close to 80 per cent of receipts.

Welcoming the work undertaken by his officials, Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD, said:

"This paper acts as another reminder of the heightened growth in CT receipts in recent years, some of which exceeded even departmental projections. Much of this relates to increased corporate profitability. As such, we must be cautious not to become too reliant on this tax head, especially in light of the changes taking place in the wider global economy. Ensuring the resilience of the public finance, through the building up of financial buffers in the form of enhanced budgetary surpluses, is so important as this will act as a support mechanism for the economy and society in the years ahead."

ENDS

Contact:

Deborah Sweeney - Press Adviser to Minister Donohoe - 086 858 6878

pressoffice@finance.gov.ie 01 6760336

Minister Donohoe welcomes publication of Corporation Tax Paper

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