The State received €1.04bn in corporate tax revenue in August
Exchequer returns for August showed another strong month of corporate tax receipts. The state received 1.04 billion euros in corporation tax revenue last month, some 800 million euros more than expected.
This was due to a “number of payments from some large companies”, mostly in the technology sector, “which may reflect an increase in sales resulting from the pandemic”, the finance ministry said.
“It is not expected that such high revenues will be repeated in the years to come,” the ministry statement added, without giving an explanation for this statement.
Since the beginning of the year, corporate tax revenues have totaled just over 7 billion euros, some 14% ahead of profile and more than 524 million euros than at the same period last year. In 2020, corporate tax generated a record 11.8 billion euros for the state, a figure that should be exceeded this year.
The exceptional performance came the same week that the Governor of the Central Bank of Ireland, Gabriel Makhlouf, warned in a pre-budget letter to Finance Minister Pashcal Donohoe of the dangers of allowing higher levels of public spending at a time when he there could be a permanent decline in our corporate tax revenue.
This could increase our debt ratio, which is already “among the highest in the developed world,” Makhlouf said.
The corporate tax warning refers to the global process led by the OECD, including a proposal to introduce a minimum effective tax rate for large companies of at least 15%. Ireland refused to sign this initial draft in July.
The government has estimated that the new global corporate tax regime could reduce our revenues by €2 billion a year.
In his letter, Mr Makhlouf also noted that the government’s recent summer economic statement predicted a sequence of much larger deficits by 2025, culminating in a budget deficit of 7.4 billion euros in 2025.
In his reaction to the Treasury figures, Mr Donohoe said: ‘The best form of defense against potential corporate tax cuts is to cut the deficit.’
How he’ll make the arithmetic of it all work isn’t clear, but Makhlouf and others are no doubt hoping for some clues in next month’s budget.