Corporate tax revenue is expected to hit a record 13.9 billion euros this year

The Ministry of Finance forecasts a record 13.9 billion euros in corporate tax revenue this year, 2 billion euros more than last year.

The forecast in the ministry’s annual budget outlook report released with the budget is €400 million higher than the €13.5 billion forecast in a pre-budget white paper released last week.

“A number of large taxpayers in the corporate sector do not appear to have been impacted by the pandemic, with profitability – and therefore tax liabilities – remaining high,” the department said.

The revised forecast improves the outlook for public finances and comes as the government signs an OECD-brokered agreement on taxation, which will see the introduction of an overall minimum rate of 15%.

The ministry said “revenue from this source” is expected to be affected as international tax policy changes come into effect.

The actual cost is difficult to determine, he said, and could be more than the 2 billion euros currently assumed.

Even with the OECD changes, corporate tax revenue is expected to rise to €14 billion next year and €15 billion by 2025.

Business tax revenue now represents one in five euros of tax collected by the State

Warning

However, the government has been warned not to use excess revenue for current spending due to the highly concentrated nature of the tax base. About 50% of revenue comes from a handful of companies, including Apple, Microsoft, Dell, Google and Oracle.

“Last week, the government decided to join the international consensus on a series of far-reaching reforms to the global corporate tax architecture,” the department said.

“This decision was guided by the need to provide long-term certainty to the business sector and avoid the reputational costs of staying out of these reforms,” ​​he said.

“Although there is a direct impact on income, the most important channel is the impact on investment and employment; in this regard, greater certainty and predictability will help make Ireland a place for mobile investment,” he added.

On the broader economy, the report notes that after “a number of false dawns, mass vaccination has paved the way for a sustainable economic recovery.”

“Consumer spending is leading the way as households begin to normalize their saving habits, and that’s expected to continue over the next year,” he said.

As previously reported, the ministry expects accelerated growth of 15.6% this year.

Budget deficit

This year’s budget deficit – the difference between spending and tax revenue – is expected to come in at €13.2 billion, against an expected €20.2 billion, boosted by strong tax revenues and a drop in taxes. expenses.

On inflation, the department said “a perfect storm has resulted in a pickup in headline inflation and core inflation since the spring, a feature of almost all advanced economies at this point.” .

“Amid supply shortages and growing demand due to the economic recovery, rising energy prices have pushed the headline inflation rate higher,” he said.

He said the ministry’s projection of an inflation rate of 2.2% next year assumes that the spike in price inflation is a temporary phenomenon, noting that consumer price inflation is expected to peak in the last quarter of this year.