Donohoe: Corporation tax take to drop by half a billion annually for three to four years 

Projected hit to tax income due to a shift in global tax policy
Donohoe: Corporation tax take to drop by half a billion annually for three to four years 

Finance Minister Paschal Donohoe speaking to the media following the publication of the taxation report. Picture:Gareth Chaney/Collins

Ireland's corporation tax intake will drop by half a billion a year for the coming three or four years, the finance minister has said.

Speaking as he published the Government's annual taxation report, Paschal Donohoe said the projected hit to Ireland's tax income is due to a shift in global tax policy.

"By the mid-2020s, we are expecting that our corporate tax collection will be one and a half to two billion euros lower than it otherwise would have been in the absence of a climate change that has now happened in corporate tax policy," he said.

The minister said the report illustrates that the tax system has shown itself to be "incredibly resilient" in the face of the Covid-19 pandemic.

"We have total tax receipts for the end of July that stood at €35.2bn, which is over 3% ahead of where we expected them to be at that point in the year."

The report says corporation tax made up 20% of the overall tax take in 2020, up from 12% a decade ago. It says that there are risks, however, because of the concentration of the take which comes from a small number of foreign companies.

Corporation tax revenues provided a welcome boost to the public finances, but simultaneously highlights the risks associated with the concentration of receipts amongst a relatively small number of large foreign-owned payers.

Mr Donohoe said he hopes by October for more clarity on the OECD tax agreement which proposes a global rate of at least 15% and to which Ireland has declined to sign up. 

He also said it is important to look carefully at how any agreement would be implemented — something he said might be clear by the early part of 2022.

Asked about the Government response to climate change, Mr Donohoe said he is committed to carbon taxes.

"It has been an ongoing feature now of the last two budgets that we've done, that have increased carbon taxation. And we have now legislated for automatic increases in carbon taxation across each year until we hit our targets of €100 per tonne of carbon emissions."

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