Government will not rely on corporate tax revenue for spending, warns Donohoe – The Irish Times
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The government will resist calls to spend windfall corporate tax revenue for fear that revenue will dry up in the future, Finance Minister Paschal Donohoe said.
Mr Donohoe was addressing an audience of 1,200 business representatives at the Dublin Chamber’s annual dinner at the Convention Center on Thursday evening.
“As you all know, we have seen a rapid increase in tax revenue from this source in recent years,” he said. “To quantify this: in 2019, corporate tax revenue was 11 billion euros, this year it will amount to more than 21 billion euros.
“Perhaps unsurprisingly, there have been many calls to spend these receipts. The government resisted – we felt it would be inappropriate for public spending to deviate from existing plans.
“Transient” income
“The key factor behind this approach is the uncertainty over future tax revenues from the corporate sector – it is absolutely imperative that the government does not accumulate permanent spending commitments on the basis of revenues which may turn out to be transitory. “
Mr Donohoe said he “strongly suspects” that the Covid-19 pandemic and the war in Ukraine “will be catalysts for major structural changes in the economy”.
“While globalization is not reversing, I think it will change,” he said. “For example, ‘just-in-time’ supply chains may be replaced by ‘just in case’ supply chains, as companies focus more on security of supply than profitability. “
National entrepreneurship
The minister also said efforts would be made to forge closer links between Ireland’s multinational business sector and local businesses here.
“Allow me to briefly highlight one area which I believe will be fundamental to advancing living standards in the future, namely the importance of strengthening the links between the multinational sector and what might be called the SME sector,” he said.
“In Ireland, we have a strong track record of attracting inward investment, usually in high value added sectors. We also have a good record of national entrepreneurship. Where we are falling behind is in deepening the links between these two major sectors.
“If we can generate a more symbiotic relationship between these sectors, I think that will greatly improve our ability to absorb the economic shocks and changes that are currently underway,” he said.
