Michael McGrath (Cork South Central, Fianna Fail)
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91. To ask the Minister for Finance his plans to commission an up-to-date review similar to the Coffey report on the sustainability of the corporate tax receipts in view of the most recent data on corporation tax released by the Revenue Commissioners; and if he will make a statement on the matter. [21001/19]

Paschal Donohoe (Dublin Central, Fine Gael)
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I recognise that there has been a substantial increase in corporation tax receipts in recent years and, while in many ways this is a positive reflection of our economic recovery and improved trading conditions, I am also aware that there are risks associated with this increase. In particular it is important to ensure that longer-term spending commitments are not entered into on the basis of a potentially short term upswing in corporate tax revenues.

The recently published Revenue data in respect of Corporation Tax (CT) payments for the year 2018 show that the share of CT receipts from the top 10 companies increased to 45% in 2018. However the report also notes that this increase was partially driven by a one-off change in accounting standards (IFRS 15) leading to additional tax receipts in 2018. If these were excluded, the share of net receipts from the top 10 companies would have been 43%.

Revenue data show that the proportion of receipts contributed by the top ten taxpayers in any given year has been relatively stable over time – for example it has ranged between 36% and 41% over the preceding five years 2013 to 2017. Revenue data also indicates that there is a level of ‘churn’ in the top-10 payers, i.e. the composition of the top 10 taxpayer companies changes from year to year. As Ireland has been consistently successful in attracting leading multi-nationals to base here, and given our level of integration with the global economy, this concentration is not altogether surprising.

Nonetheless, my Department has, together with Revenue, highlighted this as a risk in Budget and Stability Programme Update risk statements and in the Annual Taxation Report 2018. I am also aware of the risks associated with developing a reliance on potentially cyclical upturns in receipts, and the Government has taken a number of actions to address these risks, including:

- Establishing the Rainy Day Fund;

- Using the 2018 revenue over-performance to run an Exchequer surplus and prioritising the reduction of debt;

- Continuing to broaden the tax base; and

- Ensuring that receipts arising from identified one-off factors are not carried forward into the tax base for future years – for this reason €0.7 billion of the 2018 over-performance was not carried forward into the 2019 tax base on foot of the advice of the Revenue Commissioners.

With regard to the Deputy’s proposal for an assessment of the sustainability of corporation tax receipts, forecasts are inherently subjective and often rely on reference to long-term averages as a component factor. In the case of corporation tax, this subjectivity would be further compounded by the ongoing process of international tax reform. Implementation of the agreed BEPS Actions is under way and further work has commenced at the OECD to agree further changes at a global level that address the tax challenges that arise from the digitalisation of the economy. This work is at a relatively early stage and will continue over the next two years with a view to reaching consensus by the end of 2020.

I would however note that my officials are currently conducting an examination of potential policy options to mitigate against the risk of over-reliance on CT receipts and a fiscal framework to reduce reliance on CT will be published by this Department at the time of the publication of the Summer Economic Statement, 2019.

Finally, it should also be noted that a tax forecasting methodology group has been established and is currently undertaking work to review the existing tax forecasting methodology with a focus on the four largest tax heads (excise duties, income tax, corporation tax and VAT). Where appropriate, this work will make recommendations for changes to the tax forecast methodology.

Having regard to the work already under way within my Department, and the other considerations referred to in this answer, I do not intend to establish a separate review of the nature suggested by the Deputy.