The IMF still has the ability to scare the “bejaysus” out of us all. Headlines during the week of an IMF warning that half of the State’s corporate tax take could be wiped out, sounded very ominous.
The warning came in a report which ran a number of scenarios on how a minimum global corporate tax rate could impact the presence of multi-nationals in Ireland.
It turns out the €6bn wipeout scenario was predicated on the 10 largest corporate tax contributors leaving Ireland.
This seems somewhat unrealistic, especially given the top 10 includes Intel, which is banging away on an enormous expansion of its computer chip manufacturing facility in Leixlip.
The IMF itself saw the scenario as “unlikely”.
But rather than simply breathe a sigh of relief that Intel won’t be leaving us any time soon, the IMF report does contain some pretty sharp home truths.
Yes, just 10 companies paid over 50pc of our Corporation Tax take last year. The dependence on a small number of firms became more concentrated in 2020 with just 100 firms accounting for 80pc of the corporate tax paid.
Given that Corporation Tax accounted for a staggering one fifth of all taxes collected in 2020, we have just 10 giant businesses contributing 10pc of all collected taxes last year. That is precarious.
The chasm between big and small is enormous and if anything it is growing.
Corporation Tax payments from small businesses slumped by 40pc in 2020 to just €594m. Hopefully that was just a one-year blip.
But change is afoot in the US, with Treasury Secretary Janet Yellen suggesting a 21pc base tax rate for large multinationals, the investment case for Ireland will have to shift somewhat away from taxation and towards other factors, such as education, quality of life, housing, business environment and infrastructure.
Unfortunately, our scorecard here is pretty hit and miss.
And this is where the IMF report is quite interesting in a different way.
It points out that the Irish Government needs to raise more taxes to invest in education, training, affordable housing and childcare.
We were also reminded elsewhere last week that Ireland remains the only country in the OECD that doesn’t charge households for water, yet we have serious infrastructural and environmental issues around water supply.
The Department of Finance’s official estimate is that corporate tax receipts will be roughly €2bn lower by 2025, as a result of international reforms, although finance minister Paschal Donohoe has hinted the impact could be greater.
So if corporate tax receipts stop growing and begin to actually shrink, where will all the other taxes come from to invest in those other elements of our attractive FDI proposition?
Tánaiste Leo Varadkar has ruled out any hikes to income tax over the coming years.
He would have to be in government to stick to that promise.
It is hard to envisage that economic growth alone will balance the State’s books by eliminating the deficit, and retain the financial resources needed to fix other problems, which will underpin our investment offering into the future.
Has sense finally prevailed at Eir given the problems it has had at its customer care centres?
Staff working at the centres are to receive increases in earnings of between 10pc and 17pc on foot of a new agreement.
The deal brokered with the Communications Workers’ Union is described by the union as overhauling pay and bonuses for senior agents and loyalty bonuses for 600 staff at centres in Sligo, Cork and Limerick.
The customer care service was at the centre of a meltdown last year when Covid hit. Staff had to work from home. Eighty of them left their jobs in the space of a few months.
Eir chief executive Carolann Lennon told an Oireachtas committee that pay was not the problem. The challenges of working remotely were a big factor. Yet when questioned about how much the company paid these staff, she said they earned €21,000 to €23,000 plus bonuses, which was just over the minimum wage.
Surely the problem was staring management in the face. Yes it was facing an unprecedented short-term crisis caused by a pandemic, but by not financially rewarding loyalty and valuing those vital front line staff, they had left themselves vulnerable.
When Lennon was appointed in 2018 to the CEO role, she became the sixth chief executive of the company in just 13 years. Earnings at Eir have grown significantly under her tenure.
Earnings have grown but at the top line the business has been shrinking for a long time now. Revenues have declined most years since 2013, but in that year it reported Ebitda (earnings before interest tax depreciation and amortization) of €487m on revenues of €1.39bn. In the financial year 2020 it reported revenues of €1.22bn and Ebitda of €600m.
The squeeze on costs has worked for the bottom line of the business. But it doesn’t always work when a crisis comes along. Perhaps the new pay deal with customer care staff will ensure less attrition, at what is a tough job to do, and improved customer service.