The Minister for Finance Michael McGrath has today, Wednesday 26 April, said that the corporation tax data published by the Revenue Commissioners highlights the extraordinary growth in receipts, an increasing level of concentration among a small number of companies, and points to the need for a careful policy response by Government to protect the public finances into the future.
Minister McGrath was commenting as the Revenue Commissioners published its annual assessment of corporation tax developments ‘Corporation Tax – 2022 Payments and 2021 Returns’, alongside its Annual Report for 2022.
Some of the key points in the Corporation Tax – 2022 Payments and 2021 Returns’ publication are:
- Corporation tax receipts in 2022 were €22.6 billion (up 48% year on year), representing 27.5% of total tax receipts (up from 22.6% of total tax receipts in 2021);
- Corporation tax has now surpassed VAT as the second largest tax head;
- The top 10 largest corporation tax paying companies paid €13 billion in 2022, representing 57% of total net receipts (up from 53% in 2021).
Minister McGrath said:
“In 2011, the State collected €3.5 billion in corporation tax. Last year, that figure stood at €22.6 billion. This year, we expect the figure to increase further to €24.3 billion. My Department estimates that around €12 billion – half of the receipts – are windfall in nature and cannot be relied upon in the future. In fact windfall receipts are now accounting for a growing proportion of our revenues. As Minister for Finance, I am determined that we use these receipts wisely to underpin the resilience of our public finances into the future.
“We have to avoid the mistake of building up permanent expenditure and taxation commitments on the back of receipts that could prove to be temporary. To make such a mistake would be to expose taxpayers, and the sustainability of our finances, to unnecessary and unacceptable risk. A shock to corporate tax receipts would have serious repercussions for the public finances. Even in the absence of a shock, structural changes to the economy mean serious expenditure pressures are building up.
“While the National Reserve Fund serves a useful purpose in helping to address economic shocks and stabilise the public finances, I believe a new fund is needed to meet the costs of an ageing population and other pressures that we know will arise in the future. Therefore, I will shortly bring forward a scoping paper on ‘Future-proofing the Public Finances’. This will set out, in broad terms a proposal to establish a longer term savings fund to meet future expenditure needs, including the costs of an ageing population. By the end of this decade, for example, the stand-still costs of running the State will require an additional €7-8 billion per annum on 2019 levels, simply because of demographic changes.
“The paper will examine a number of international examples of how such funds operate, and will consider scenarios for withdrawals from the fund. The buoyant corporation tax receipts present an opportunity to us to make our nation’s public finances safer in the future. This is an opportunity I am determined to take.”
