Corporate tax windfalls remain a puzzle

Corporate tax windfalls remain a puzzle

It remains difficult to judge how much of the huge haul in corporate tax revenues are windfalls and will not be repeated in the coming years, according to research by the Department of Finance.

Its research, Modelling Recent Developments in Corporation Tax, found most of the €10.4bn the exchequer collected last year in corporation tax revenues can be accounted for in economic models. “However, close to €1bn of receipts in 2018 cannot be fully captured by standard macroeconomic variables,” it stated.

The Irish Fiscal Advisory Council, the Economic and Social Research Institute, and the Central Bank, have long warned the Government over basing spending plans on potentially volatile corporate tax, or CT, receipts. Corporation tax receipts have swelled from €4.3bn in 2013 to €10.4bn last year, and will set a new record this year.

But the Irish tax regime is facing risks amid the global tax reforms proposed by the Organisation for Economic Co-operation and Development (OECD), which yesterday published the public submissions it received to the first round of its proposed reforms.

“Looking specifically at the 2018 outturn, it remains difficult to assess how much of the CT excess (relative to model estimates) are windfalls, or maybe more permanent in nature. It could take several years for clarity to emerge on this issue,” the researchers found.

And Finance Minister Paschal Donohoe said the Government must “not to become too reliant on this tax head, especially in light of the changes taking place in the wider global economy.”

It remains difficult to judge how much of the huge haul in corporate tax revenues are windfalls and will not be repeated in the coming years, according to research by the Department of Finance.

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