Donohoe 'convinced' Corporate Tax will decline as 'careful' budget promised
It comes amid warnings from Public Expenditure Minister Jack Chambers that Budget 2026 will be "approached with caution" and in a "careful, sensible, sustainable" manner.
The Exchequer returns for the first half of the year were published on Thursday and recorded a surplus of €4.5 billion. This compares to a surplus of €3.1 billion recorded in the same period last year.
However, this is largely skewed due to the arrival of the Apple money following the Court of Justice of the European Union (CJEU) ruling of last September, which ordered Ireland to collect more than €13bn in taxes plus interest from the tech company.
When this money is excluded, the Exchequer surplus falls to €1.2bn, a decrease of €1.9bn on the same period last year. Minister Donohoe said that was largely due to the transfer of money to long-term Government funds.
Tax revenue to end June stood at €49.5bn, €4.7bn (10.5 per cent) ahead of the same period last year. When the Apple money is not included, this falls to € 47.7 bn. However, it was still €3bn higher than the same period last year.
Corporate tax intake was €14.8bn, up €2.6bn from the same period last year. However, when the Apple money is discounted, it falls to €13.bn, up €900m.
In a stark warning, Minister Donohoe warned that a fall in Corporate Tax is inevitable.
He said: "It is difficult at this point in time to give an exact point at which I expect to see decline to begin to happen.
"But what I'm convinced of is the decline will take place. I believe what we will see is that we will see the growth that we've had in the last few years begin to stabilise.
"I saw some evidence of that last year when we actually missed our revised corporate tax forecast for 2024 by €1bn.
"Up to the end of May, we were around €580 million behind where we expected it to be.
"I believe, and I'm convinced, that we will first stabilise and then begin to decline.
"The broad trigger for that will be we will see in the world that we're in at the moment, the profitability of large companies either begin to stabilise and then decline after many years of doing well or you will see their profits begin to be associated more and more with the US.
"That will either happen because of trade or will happen because of global tax reform."
Mr Donohoe said this "could be a number of years away" and although there would have been times when he would have been able to give "great assurances" on when things might change he said, due to "political decisions," it is harder to pinpoint the time.
He added: "I didn't anticipate that we would see the kind of volatility around the rules of trade that we are now seeing at the moment and the scale of tariffs from some parts of the world now become permanent."
Minister Donohoe said that while the Irish economy is expected to grow, it will now grow at a lower rate and tariffs will affect Ireland's public finances, adding, "This is why we need to be careful".
He also suggested that October's budget will be "safe and good".
Minister Chambers also sounded a note of caution, warning that ministers will have to "set out their real priorities".
He added: "We are in a different economic context where real risks that have been flagged in recent years on a consistent basis are around us and could crystallise quickly.
"On that basis, we have to have a really careful, sensible and sustainable approach to fiscal policy in how we frame Budget 2026."
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