Corporate taxes contributed about 15% of all tax revenues the State raises, Finance Minister Michael Noonan said yesterday, but there was no disguising the extent to which the billions of euro in extra company tax unexpectedly pouring into the exchequer has boosted the chances of the Coalition parties at the looming election.
Overall, the State collected €45.6bn in taxes in 2015 at a time when the economy at last performed to its strengths and posted growth of over 7% — among the fastest of any advanced economy in the world.
Add in other non-tax revenues, including Central Bank income, and the State saw €60.1bn in revenues coming its way, the year-end exchequer returns showed.
A constellation of extraordinarily favourable events — including one of the steepest depreciations ever seen for the euro against the dollar and sterling since the currency’s birth — helped boost Ireland’s exporting firms which predominantly depend on Britain and the US for their major markets.
And the spotlight yesterday remained focused on those corporate tax receipts, which brought in €6.87bn — almost €2.3bn more than anticipated a year earlier.
That €2.3bn accounted for 70% of the €3.3bn in excess tax revenue the State had not expected to collect.
Because of the banking crisis, many have become immune to what billions of euro in additional revenues represent.
One measure is that the excess corporate tax receipts could have funded the building of four new national children’s hospitals.
Another way of looking at the bounty is to imagine what would have happened to the Government’s budget sums if the unexpected funds had not become available.
The supplementary budget for 2015 announced in October just days before Finance Minister Noonan unveiled his budget for 2016 allocated up to €1.5bn for spending in the last few weeks of last year.
In the absence of the corporate tax bounty, plugging the huge deficit in the health budget would have been all that more difficult, as would have finding the resources to spend on several initiatives, including transport, which will be be detailed soon.
All the other ‘big four’ sources of taxes — income tax, Vat and excise duties — all performed in and around as expected.
However, the mystery about the corporation tax windfall endures, and officials and ministers threw little new light on the issue yesterday.
Mr Noonan said that his 2016 budget had not been built around corporate tax receipts, which were anyway sustainable.
He said budget changes to research and development incentives in recent budgets, amid moves to phase out the ‘double Irish’ accounting procedure, may have encouraged multinationals to put down deeper roots here.
Mr Noonan and Expenditure Minister Brendan Howlin now see the State achieving a balanced budget — under the way the EU accounts for it — in 2017.
Such is the momentum of the economy that some analysts believe the budget deficit will be closed this year.
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