Experts lash budget’s use of corporate tax boost funds

By Eamon Quinn, Business Editor

Opposition politicians and experts have criticised Finance Minister Paschal Donohoe for funding increased spending and plugging a budget hole in the health service from an additional €1bn corporation tax receipts bounty.

It is understood €700m of the €1bn bounty is linked to early payments of company profits paid by one unnamed company.

The windfall, announced late last Friday, will bring overall receipts from taxing company profits to €9.5bn this year, up from the €8.5bn forecast in April.

“Our growing dependence on corporation tax and in particular on a small number of multinationals is a risk for the economy and the public finances,” Michael McGrath, Fianna Fáil’s finance spokesman, told the Irish Examiner.

While the ball has bounced in our favour this time, it would be an entirely different story if the minister had to announce an expected €1bn shortfall in the eve in corporation tax of the budget. We can’t base our plans on the assumption that booming corporation tax receipts will continue indefinitely.

Seamus Coffey, chair of the Irish Fiscal Advisory Council, said the additional revenues from company taxes was as if the country had struck oil and was forever ramping up spending based on revenues that would eventually run out.

“It is great while the revenues are coming in,” said Mr Coffey. “But the increase in corporation tax revenues has the potential to be like oil and those revenues will drop as they run out.

“The concern isn’t that we are receiving this money — it is better to be getting the money than not — but the concern would be that it could be used in the budget arithmetic and of course it should not be used.”

Mr Coffey told the Irish Examiner that “the money hasn’t even been collected and it is odd to hear in public of a tax payment that has yet to be made and is expected to be made in 2018” at a time when discussions are ongoing over the budget for 2019.

He said the corporation tax receipts should not be used to fund a gap in the health service budget. Other resources will have to be found next year and bring into question the credibility of the health plan.

He said that so-called concentration of tax will become even more elevated “if these payments are from a small group of companies”.

The spending of the corporation tax receipts undermines planning for budgets over a number of years, said Mr Coffey.

“Other countries do a more medium approach to spending,” he said. “Annual budgets should be over two, three, or four years where you set out what you are going to do over a period of time.”

Alan McQuaid, chief economist at Merrion, said relying on corporation tax receipts will leave the country “wide open” to any shocks. He said there needs to be more discussion about the identity of the small handful of companies that fuel corporation tax revenues.

A department spokesman said: “As Minister Donohoe indicated on Friday, the Office of the Revenue Commissioners has analysed the corporation tax take for 2018 and believe approximately €700m of corporation tax being collected this year will not travel into next year. The affairs of individual taxpayers is a matter for the Office of the Revenue Commissioners.”