Catherine Connolly (Galway West, Independent)
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112. To ask the Minister for Finance if his attention has been drawn to a report (details supplied) which highlighted Ireland’s over-reliance on corporation tax receipts from the ten highest-paying companies; his plans for a review of Ireland’s reliance on foreign direct investment; and if he will make a statement on the matter. [46373/22]

Seán Haughey (Dublin Bay North, Fianna Fail)
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142. To ask the Minister for Finance the action that he is taking to address the risks associated with the recent upward shift in corporation tax receipts; and if he will make a statement on the matter. [46305/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 112 and 142 together.

I am very much aware of the Irish Fiscal Advisory Council’s views on the need to reduce the over-reliance on corporation tax receipts and the potential level of 'excess' receipts as highlighted in their Fiscal Advisory Report.

Indeed, the potential volatility and concentration risks in corporation tax receipts are dangers which my Department has repeatedly drawn attention to since 2015. Just this month my Department published analysis highlighting the fiscal vulnerabilities stemming from the upward shift in corporate tax receipts in recent years in a paper titled De-risking the Public Finances - Assessing Corporation Tax Receipts.

Analysis contained in this publication shows the share of overall tax revenue accounted for by corporation tax receipts is now at historically high levels. Receipts have been on a steep upward trajectory since 2015, reaching €15.3 billion last year, an increase of over 120 per cent relative to 2015.

A level shift of this magnitude, occurring over such a short timeframe, naturally raises questions regarding the sustainability of this revenue steam. The concentration of these receipts within a small number of firms raises further concerns about their sustainability. Indeed, as the Deputy is aware, over half of corporate tax receipts are paid by just ten large payers.

Unfortunately, it is not possible to be definitive regarding the proportion of receipts which are potentially at risk. However, analysis set out in my Department’s publication suggests the quantum of last year’s CT receipts that could be viewed as ‘windfall’ in nature could be in the region of €4 to €6 billion. As a result, there is a strong argument to treat a portion of corporation tax receipts as volatile, and hence, potentially non-stable, in nature. In doing so, we can address a key risk to the public finances and thereby help ensure our country’s fiscal sustainability. The paper goes on to suggest that ring-fencing such windfall revenues in a forward-looking fund, such as a Resilience Fund or a re-launched version of the National Pension Reserve Fund, is one option to safeguard the future sustainability of the public finances.

In addition, in order to highlight this ongoing volatility risk, my Department will publish an estimate of the budgetary position excluding identified windfall receipts. This will be presented as a new indicator known as the GGB*, in Budget 2023.

In terms of reliance on foreign direct investment, it is very timely that the Department of Enterprise, Trade and Employment is currently reviewing our enterprise policy. The White Paper on Enterprise, due for completion in Q4 2022, will outline the strategic direction of Ireland’s enterprise policy in the context of challenges, opportunities and new drivers of growth.