Fiscal watchdog supports wide range of tax hikes

Ifac said Commission on Tax and Welfare proposals would boost tax revenues by a significant amount

The Irish Fiscal Advisory Council said 'increases in taxation on this scale' would mean Ireland would move away from being a relatively low-tax State in European terms.      

The fiscal watchdog has given its support to controversial proposals for a broad range of tax increases to help the Government to prepare for climate change and wean itself off its dependence on the huge corporation tax receipts from the multinationals.  

The Irish Fiscal Advisory Council (Ifac) said the recent proposals from the Commission on Tax and Welfare would boost tax revenues by a significant amount to help the Government to also meet other challenges it faces from an ageing population.

"Property-related taxes play a large part in the proposed reforms. Other measures are likely to be spread relatively evenly. Higher capital taxes, Vat, environmental taxes, and taxes on incomes could all contribute," Ifac said. 

The watchdog didn't downplay the effects that adopting the proposals would have on the tax take in Ireland, saying "increases in taxation on this scale" would mean Ireland would move away from being a relatively low-tax State in European terms.      

However, "Ireland faces major choices about the size of the State," said Ifac chief economist Eddie Casey. 

"Whatever choices are made, large pressures are coming," he said, including the need to take account of spending demands for an ageing population, the climate crisis, "and the over-reliance on unpredictable corporation tax receipts". 

Concerns about the Government relying on multinationals to pay for a large part of the public spending have increased in recent weeks as the global inflation and economic crisis and rise in interest rates have led to a significant shedding of jobs by US tech giants.                   

Many of the US tech giants have significant European bases in Ireland and account for an outsized share of booming corporation tax receipts collected by the Government. 

A marked economic slowdown could mean the taxes paid by the tech giants could slow dramatically.         

Trade figures

The latest trade figures from the Central Statistics Office (CSO) published on Tuesday show little fallout from the inflation crisis so far this year, thanks to pharma and IT goods.        

For the first nine months, exports of almost €37bn were up 30% from last year, while imports rose 42% to €30.8bn.     

In September, the CSO said exports of medical and pharma products climbed by €1.1bn from September 2021 and exports of organic chemicals rose by €2.5bn. 

These sectors are dominated by the multinationals. Exports of indigenous Irish firms were also higher, with food and live animals increasing by €459m over the same period.

Meanwhile, a survey by business services firm Accenture and S&P Global Ireland has found that the confidence of Irish businesses going into the winter has fallen, but employment prospects remain the brightest in Europe. 

"Companies faced the twin challenges of high inflation and a weakening European economy set against a backdrop of the ongoing war in Ukraine, looming winter energy crisis and ongoing global supply chain difficulties," the survey found. 

"The profits outlook remained negative, although Irish firms were the most upbeat in Europe regarding their hiring plans," it said.