Taioseach plays down budgetary watchdog's concerns over government's reliance on corporation taxes

Any sudden drop-off in booming corporation tax receipts could be replaced by rising home and office stamp duty taxes, Taoiseach Leo Varadkar has suggested.

Budgetary watchdog, IFAC, today warned that the Government is over reliant on corporation taxes, which have doubled since 2014 to more than €10bn.

Fiscal chiefs, in their latest report, warned that up to €6bn, or some 60% of the Government's corporation tax windfall, may actually be temporary. The level of reliance on business taxes “left Government revenue particularly exposed to shocks,” IFAC claimed.

The council said that between €2bn and €6bn in corporation tax may be “excess”, leaving the public finances exposed to a reversal.

Responding, Taoiseach Leo Varadkar defended the Government strategy of sourcing large amounts of business receipts: “They're [IFAC] flagging something that I think we're all very aware of. That the amount of money we're taking in and profit tax from companies has really soared in the past 10 years. We used to be criticised for not taking enough tax in from companies.

"Now it's been pointed out that we're taking in a lot of money, in profit taxes on corporations. And that may not be there forever. And that's why we need to be prudent into the future. That means running a budget surplus will do that this year. We'll do that next year. And we need to continue to increase our budget surplus over the next couple of years. So that we have a cushion in place.”

“Should we find that corporation profit tax receipts fall, and they're not picked up by a tax in some other area, bear in mind that as construction increases and more houses are being built, the increasing yield in stamp duty may help to compensate for some of that," he added.

Mr Varadkar also disagreed with IFAC's warning that Ireland is too reliant on corporation tax receipts: “I wouldn't use the term 'over-reliant' but it is absolutely vulnerability.”