Peter Vale comments on the Fiscal Council's Fiscal Assessment Report

Peter Vale reacts to the Fiscal Council's latest report, highlighting risks to Ireland’s Budget surplus from volatile corporation tax receipts.

It’s clear from the Fiscal Council report that Budget surpluses are heavily dependent on the maintenance of existing levels of corporation tax receipts.

The dip in corporation tax receipts in May underlines the volatility in these receipts, with a reliance on a very small number of large companies for the bulk of the receipts.  Worryingly, there does not appear to be much churn year on year in the make up of the largest corporate taxpayers.

It’s possible that our corporation tax receipts will increase further in the future, driven by the 15% global minimum tax rate and the expiration of significant tax allowances.  But we’re equally susceptible to the adverse impact of factors outside our control, including further US tax reform, which may incentivise the migration of intellectual property to the US.

A large portion of corporation tax receipts is driven by valuable IP located here.  A migration of some of this IP could see a dramatic drop in corporation tax revenues over a period of years, underlying the importance of supporting the indigenous sector in order to de-risk the possibility of a fiscal jolt.