Alan Dillon (Mayo, Fine Gael)
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138. To ask the Minister for Finance the role FDI multinationals and technology companies play in supporting Ireland’s economy; and the latest Exchequer returns from corporation tax. [55889/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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The multinational sector in Ireland makes a highly significant contribution to the domestic economy, with the foreign-owned sector accounting for 55 per cent of gross value added in the economy in the second quarter of this year. During the Covid-19 pandemic, the resilience of the multinational sector helped support the economy through the worst of the crisis and has bolstered the recovery over the course of this year.

The Industrial Development Agency estimates that more than 275,000 people were directly employed by the multinational sector in Ireland in 2021, with the large presence of multinational enterprises supporting even more jobs through indirect effects. The level of employment in the ICT sector alone currently accounts for 6.5 per cent of total employment, following a rapid expansion from 5.4 per cent just prior to the pandemic.

The multinational sector has driven growth in the traded sector in recent years, with export growth of 20 per cent in the first half of this year no exception. Computer services exports, which account for almost 30 per cent of total Irish exports, grew by 19 per cent in the first half of the year. Exports from the pharmaceutical sector, accounting for a further fifth of total exports, have grown by 35 per cent so far this year. While export figures to date show continued strength, a slackening of growth in the multinational sector is expected, in line with the darkening international outlook.

Multinational enterprises also contribute significantly to the economy by way of tax receipts. For 2022, corporation tax receipts are estimated to exceed €21 billion, overtaking VAT to become the State’s second-largest source of tax revenue, after income tax. However, much of this growth may be windfall in nature and is subject to exceptional volatility. As I have stated on multiple occasions, such receipts are not an appropriate basis for funding public expenditure.

That is why Government has committed to transferring €6 billion in windfall corporate tax to the National Reserve Fund across this year and 2023 to rebuild our fiscal buffers and ensure that these potentially transient revenues do not become part of the permanent expenditure base.

Because of these factors, Ireland is highly vulnerable to adverse developments within the multinational sector. Moreover, as a small open economy with a large presence of multinational enterprises, Ireland is particularly exposed to risks in the global economy, including further energy and commodity price shocks, tightening financial conditions, and heightened geopolitical tensions. My Department will continue to closely monitor these risks, and the evolution of conditions in the multinational sector in particular.