Corporate tax revenue in Ireland will start to fall from 2023, according to Finance Minister Paschal Donohoe.
New figures revealed yesterday showed Irish tax receipts hit their highest level last year at €68.4 billion, reducing the Treasury’s deficit to €7.3 billion.
This is the highest tax yield on record, and more than €9 billion more than the previous highest figure in 2019.
Corporation tax has soared nearly 30% and is now the country’s second largest income in the state.
For years, a low corporate tax rate has been a key element of Irish economic policy.
However, last year Ireland agreed to join the OECD framework for a headline tax rate of 15%, giving up its former popular rate of 12.5%.
Donohoe said today he expects from 2023 Ireland will start to see its tax revenue decline.
“If you look at where we are with this rate, overall Ireland will lose money and no one knows that better than me,” he said.
“We are going to lose money because of two events. The first thing we will lose money from over time will be the full implementation of the global tax reform package.
He added that it was not just about the reformed tax rate, but “the change that will occur regarding where the tax is paid”.
“Second, many of the big taxpayers are in a very high profitability position due to other events that have happened in the global economy.
“And we cannot and should not expect that to continue. We will therefore come to a point where our corporate tax revenues – and I have been saying this in particular since 2018 – will go down,” he told RTE radio.
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He said he expects that in the government’s budget for 2023 the Irish corporate tax rate will be set at 15%.
According to the latest data from the Ministry of Finance, consumer spending and an increase in wages helped to strengthen the tax figures.
The Department of Finance said Ireland now collects one euro out of every 4.50 euro collected in overall tax revenue.
Figures from the department show a public treasury deficit of 7.4 billion euros, an improvement of just under five billion euros on 2020.
The Department of Finance’s chief economist, John McCarthy, said total spending for the past year was around 105.5 billion euros.
Capital expenditure amounted to almost €10 billion, up around 3% compared to 2020.