JOB losses in the tech sector could be as high as 2,307, the Central Bank estimates, as it warns the tax take is exposed to the fortunes of a handful of foreign firms.
The report was published before US tech giant Microsoft announced a further 60 layoffs in Ireland.
The number of confirmed layoffs in Ireland is 1,474, or 0.9pc of the current tech workforce, a Central Bank report has found. The higher number of layoffs would amount to 1.4pc of the tech sector or 6.2pc of the numbers hired during the pandemic.
In a signed article ahead of its quarterly economic forecast this week, the Central Bank pointed to the outsized impact of the information and communications technology (ICT) sector on the Irish economy.
ICT firms make up 6.4pc of overall employment and generate 12pc of all income taxes and 21.3pc of corporation tax.
Foreign firms make up 74pc of the ICT sector’s wage bill, 97pc of profits and around 60pc of jobs – double and even triple foreign firms’ contribution to the overall economy.
ICT jobs generate the largest amount of income tax per employee – around 2.5 times the average worker – helping to buoy income tax revenue during the pandemic as other sectors shut down.
But corporation tax is particularly “sensitive” to profitability in the sector, the Central Bank said, with the share of the corporation tax take paid by ICT firms doubling over the last decade.
“Corporation tax revenue is sensitive to developments affecting specific firms, or a small number of firms, in the sector,” the Central Bank report said.
“If profitability were to decline in large ICT firms, it is possible that tax revenue would be negatively affected through a reduction in corporation tax, while PAYE and USC would be lower if weaker ICT performance passes through to staffing levels and salaries.”
The report found that the overall fiscal impact of a downturn will be “larger” due to ICT’s links with other sectors of the economy.
Sales to the ICT sector make up around 40pc of turnover in the administrative and support services sector and 15pc of turnover in wholesale and retail trade.
Those two sectors – along with the manufacturing sector, which is also exposed to ICT – make up almost half of all jobs in the economy and a third of the value added, and all three are likely to see “negative spillovers” from a tech downturn, the report said.
The report also shows the fast pace of growth in the sector, which increased after 2015 but has stepped up a gear since the pandemic.
Employment in the sector rose by a third since the pandemic, hitting 164,600 in the fourth quarter of last year. This was the fastest pace of employment growth across all sectors.
Between 2020 and 2022, ICT accounted for 28pc of all employment permits issued, with Apple, Google/Alphabet and Facebook/Meta making up 6pc of the total.
Tech workers tend to be younger, male and better-educated than the rest of the economy, and are likely to find alternative employment if layoffs increase, the Central Bank said.