Changes could leave Ireland 'even more reliant' on corporation tax 

From the middle of next year, large companies will taxed at a 15% effective rate

Corporation tax now makes up a quarter of the country’s total tax revenue, with three-quarters of that being paid by large US multinational companies. Picture: David Creedon

There is a risk Ireland will become even more reliant on corporation tax receipts from just a handful of US multinationals in the coming years as the effective tax rate increases and potential profits from AI and drug investments accrue in just a small number of larger players, a report has said.

Ireland’s corporation tax is highly concentrated in just a few companies, with the Government often warning the windfall receipts in this category cannot be relied upon into the future.

The top 10 highest paying corporate groups accounted for 59% of total corporation tax receipts in 2024, up from about a third in 2008. Corporation tax now makes up a quarter of the country’s total tax revenue, with three-quarters of that being paid by large US multinational companies.

According to a new report by the Irish Fiscal Advisory Council (Ifac), into how recent US policy changes around tariffs and other reforms could impact Ireland’s corporation tax receipts, the bulk of Ireland’s largest corporation taxpayers have not yet been directly impacted by the US tariffs.

The report said two broad sectors — manufacturing, which is mainly pharmaceuticals and tech — account for, on average, 87% of the corporation tax paid by large US-owned multinationals in Ireland. Both the tech and pharma sectors have avoided US tariffs to date. 

However, author of the report Brian Cronin said that could change quickly as the “US is trying to encourage more manufacturing at home, and it’s also pushing to lower drug prices domestically”.

“Both could reduce the corporation tax paid in Ireland. However, there are factors that could increase Ireland’s corporation tax,” he said.

He said these factors include the performance of major new drugs whose active ingredients are made in Ireland.

"Profits in the tech sector are also rising, driven by advances in artificial intelligence and growing demand for their products and services."

On the upside, Ireland is currently producing highly profitable weight-loss drugs, demand for which is growing strongly. In addition, companies with operations here could see profits rise from investment in AI and corporation tax receipts will benefit from the minimum 15% effect tax rate for larger firms due to be implemented in the middle of next year.

However, while these tax increases may add to the public coffers, they could make the country even more reliant on just a handful of US firms which could cause problems for the Government should one or more of these sectors experience a downturn.

The increase in the effective corporation tax rate from next year means Ireland’s revenues "will likely become even more reliant on a small number of very large US-owned multinationals". 

“In addition, any future large profits from artificial intelligence and weight-loss or diabetes drugs will likely accrue to a small number of major players. This increases the risk of sudden swings [up or down] in revenue,” the report said.

While tech and pharmaceuticals have escaped tariffs, there are still other issues that could present a threat to Irish corporation tax receipts.

Potential tariffs and reduced drug prices in the US could make the pharma sector less profitable, which could see corporation tax fall.

Also, the longer-term prospects for tech firms remain unclear.

“They depend on whether large investments in artificial intelligence generate higher profits, which is still uncertain,” the report said.