James Lawless (Kildare North, Fianna Fail)
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351. To ask the Minister for Finance the way in which tax receipts in 2020 compared to expectations at the outset of 2019; and if he will make a statement on the matter. [1857/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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I assume the Deputy is referring to how receipts in 2020 performed compared to expectations at the outset of that year, rather than 2019. In January of 2020, my Department published a high-level update to its economic fiscal and forecasts in the Medium Term Fiscal Strategy. At that stage, tax revenues for 2020 were estimated at €63.5 billion, which would have represented growth of 7 per cent on the record 2019 performance of €59.3 billion.

Reflecting the impact of Covid-19 on our economy and public finances, tax receipts in 2020 ultimately amounted to €57.2 billion, some €6.3 billion under the initial, pre-Covid projections published in January and by €2.1 billion, or 3.6 per cent on 2019.

However, the decline in tax revenues in the year was not as steep as had been feared. Although most revenue streams declined sharply, continuing growth in corporation tax receipts, and a remarkable resilience in income tax receipts, helped to prevent a more severe deterioration. Income tax receipts were down only 1 per cent in 2020, which is a testament to the highly progressive nature of our tax system. Unfortunately the worst affected sectors of the economy were dominated by relatively low wage earners, so most of those who lost their employment as a result of the pandemic were outside the income tax net.

The Government has acted to support those out of work through the Pandemic Unemployment Payment (PUP). Just under €5 billion was spent on PUP payments last year and the Government is committed to continuing to help those who have lost their jobs under the current restrictions.

Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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352. To ask the Minister for Finance the way in which corporation tax receipts held up in 2020. [1863/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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Corporation tax receipts demonstrated strong growth in 2020 despite Covid-19, increasing by almost €950 million to reach €11.3 billion, the highest level on record. This, and a resilience in income tax receipts, boosted the fiscal position and prevented a more severe deterioration in the public finances.

These receipts are welcome, and a reflection of the success of our industrial policy in attracting high-quality firms to Ireland. There is evidence that, in particular, the pharmaceutical, ICT and financial sectors have contributed to the record level of receipts received in 2020. The continued strength in corporation tax revenues means that we are borrowing less than would otherwise be the case.

However, as the Deputy will be aware, I have stated on many occasions that corporation tax receipts are subject to exceptional volatility and unpredictability. Receipts are vulnerable to the business decisions of a relatively small number of large, multinational firms.

Additionally, forthcoming changes to the international tax regime are likely to negatively impact upon revenues. My Department has projected that the implementation of the OECD BEPS reforms may lead to fall of €500 million per annum in corporation tax receipts from 2022 onwards. Corporation tax receipts are not a sustainable basis upon which to make permanent expenditure commitments.

My Department will be updating its medium-term forecast of corporation tax receipts as part of the Stability Programme Update in April.