- Tax revenues have recorded robust growth, but there are vulnerabilities below the headline figures.
- Analysis of tax revenue highlights the concentration of receipts in a small number of sectors of the economy, with a particular focus on the ICT sector in this year’s report.
The Minister for Finance, Michael McGrath TD, has today (24th August) published the Annual Taxation Report, analysing the structural features of the Irish tax system.
The Annual Taxation Report 2023 is the Department’s sixth such report. These reports complement the short-term, monthly reporting of tax revenue developments in the Fiscal Monitor with a longer-term analysis of trends in revenue over time. This is motivated by the need to avoid allowing imbalances in tax revenue to build up over time: by examining long-term trends in tax revenue, such emerging imbalances can be identified and addressed.
The latest report details the concentration in the tax revenue base at a sectoral level: while the public finances are heavily reliant on a relatively small number of taxpayers and large multinational firms, the tax base is also concentrated in a small number of ‘tax-rich’ sectors. The report particularly highlights the importance to the public finances of the ICT sector, which in spite of widespread lay-offs saw continued overall employment growth in the year to the end of June: the ICT sector now accounts for some 10 per cent of income tax revenues and around 35 per cent of corporation tax receipts (when including ICT manufacturing).
Commenting on the publication, Minister McGrath said:
“The Annual Taxation Report is a welcome contribution to the policy debate, particularly as we consider changes to tax policy in advance of Budget 2024. The report highlights that, while the headline figures are undoubtedly positive, there are still real vulnerabilities beneath the surface. This provides a timely reminder of the importance of taking the appropriate policy decisions today to secure the future of the public finances.
The Government’s budgetary strategy outlined in the Summer Economic Statement sets out a pathway that will ensure we maintain our public finances on a stable trajectory, continue to invest in our public services while actively addressing the structural risks in our tax base, particularly around volatile corporation tax revenue. These are the fiscal objectives that I will have in mind as we draft Budget 2024.”
