Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

My Department estimates that in 2022, windfall corporation tax receipts were in the region of €11 billion. Going forward, an annual average of between €11-12 billion of corporation tax receipts was identified in the Stability Programme Update 2023 as being potentially at risk. The level shift in corporate tax receipts, occurring over a very short timeframe, raises legitimate questions regarding the sustainability of this revenue steam.

The concentration of receipts within a small number of firms is an additional vulnerability – the latest data show that over half of corporate tax receipts is paid by just ten large payers. This means that €1 in every €7 of all tax collected by the State is directly sourced from just ten large corporate tax payers, a major concentration risk.

In this context, my Department recently published a scoping paper outlining a range of illustrative options to help to insulate the public finances from the risks associated with an overreliance on potentially transitory windfall corporation tax receipts, while also putting money aside to contribute to future ageing and other structural costs.

Work on proposals for establishing such a long-term savings vehicle is ongoing and will take into account the analysis contained in the Department’s paper ‘Future-proofing the Public Finances – the Next Steps’.

In addition, my Department has updated the fiscal metrics it publishes in order to increase transparency around the risks which corporation tax windfalls may present. In Budget 2023, a new metric was introduced called Underlying GGB, which strips out the estimated windfall receipts from the General Government Balance to give a better picture of the public finances. When these windfall receipts are stripped out, the headline budgetary surplus masks an underlying deficit somewhere in the region of €3 billion.