Evergreen corporate taxes insulate public finances from trade turmoil

Irish Times

3 days ago

Analysts have been monitoring the
Department of Finance
's monthly exchequer numbers like hawks.
Any sign of a slowdown in multinational profitability as a result of
US tariffs
and/or a weakening global economy is likely to manifest in Ireland's
corporate tax
numbers.
Receipts from the business
tax
generated a record €28 billion last year (excluding the Apple tax money) and are the reason why Ireland is running a sequence of budget surpluses instead of deficits like many of its peers in Europe.
In May, corporate tax receipts fell by 30 per cent but department officials brushed off suggestions this was related to the current turmoil around US trade policy, blaming 'once-off factors' instead.
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They were right. The June returns, which we got yesterday, show the tax channel generated €7.4 billion last month, which was €1.5 billion or 25 per cent up on the same month last year.
This means that on a cumulative six-month basis, receipts are already up (on last year) by 7.4 per cent at €13.1 billion and headed for another record year-end total of close to €30 billion.
Ireland, with its big multinational sector and heavy reliance on exports, is perched rather precariously in the middle of a brewing transatlantic trade war and a global retreat from free trade.
But the two big sectors that drive exports and corporate tax here – pharmaceuticals and IT – are outside of US president Donald Trump's current tariff dragnet.
And while Trump has threatened to impose tariffs on pharmaceutical imports and/or reduce the sector's relatively high pricing in the US, for now the industry remains highly profitable and the Irish tax numbers reflect that.
The June corporate tax numbers, which reflect payments from companies with financial years ending in December (the list includes Google, Meta, Microsoft and Intel) tend to be indicative of the annual trend and the November numbers (the most important month) bode well for the public finances as a whole.
'Unless there is a sharp fall in the economy, it would be reasonably anticipated that there might be a fairly strong November figure,' the department's chief economist John McCarthy said.
In an attempt to temper expectations around the seemingly evergreen corporate receipts, Minister for Finance Paschal Donohoe said he expected to see a 'decline' at some point but it could be 'a number of years away'.
'I believe we will see the growth that we've had over the last few years begin to stabilise, and I saw some evidence of that last year when we actually missed our revised corporate tax forecast for 2024 by €1 billion,' he said.
His cautious outlook contrasts with that of the Irish Fiscal Advisory Council, which expects receipts from the business tax to rise by about €5 billion from 2026 onwards as additional revenue from the new minimum tax rate of 15 per cent flows in.
Several big taxpayers here have also been availing of generous tax-cutting capital allowances that are due to run out, meaning they will be liable to pay more tax – another factor likely to drive receipts.
Whether these bumper receipts are being put to good use is a different matter with Donohoe noting there would be €16 billion saved in the two State funds by the end of this year.