NTMA has warned that a reallocation of taxing rights of digital companies to larger nations will reduce Ireland’s corporation tax base
The National Treasury Management Agency (NTMA) has dramatically increased its estimate of the impact of global corporate tax reforms on Ireland’s finances.
The agency, which raises debt funding internationally to finance Government spending, is telling investors that proposed changes to how countries tax large multinational companies could cost the Exchequer more than initially estimated.
In a presentation for Government bondholders published on Tuesday, the NTMA warned the OECD's planned reallocation of taxing rights of digital companies to larger nations “will reduce Ireland’s corporation tax base. Some estimates place the hit at up to 20pc per annum".
The Department of Finance is expecting corporate tax receipts of €13.9bn in 2021, meaning the impact of the OECD plan would cost almost €2.8bn this year if it was already in place.
The NTMA is forecasting a “plateau” in the corporate tax take through 2025, which would put the cumulative tax loss from the reforms at €14bn by the middle of the decade.
This is a far higher estimate than the NTMA was presenting to investors as recently as April, when the agency said the potential impact of the OECD changes was in the range of 5pc to 15pc of the tax take.
Since then, the so-called “Base Erosion Profit Shifting” (BEPS) negotiations have advanced to include a global minimum tax of 15pc on the 750 biggest international firms, but the bigger impact looks likely to come from changes to where internet companies book their taxable profits.
The NTMA also told investors that the Ireland Strategic Investment Fund (ISIF) would be cutting the “carbon intensity” of its €5.4bn global portfolio of investments by 50pc by 2025.
The fund, which invests in global securities to generate cash to help finance companies and infrastructure in Ireland, is planning to divest from higher-carbon holdings, allocate capital to low-carbon investments, and engage with investee companies to get them to adopt more sustainable practices.
ISIF is also a ground-level financial backer of Just Climate, Al Gore’s new green investment platform, which launched yesterday with seed money from Microsoft and Ikea.
The new asset manager has pledged to invest in solutions that would help limit global temperature increases.
As of the end of 2020, ISIF had already allocated 5pc of its global portfolio, or €290m, to Mr Gore’s established sustainable investment manager, Generation Investment Management.
Yesterday ISIF sold another large block of Bank of Ireland shares, bringing the Government's stake below 10pc.