Volatile corporation tax unsustainable
The announcement of an extra full €1bn in corporation tax receipts ahead of earlier forecasts is welcome news at a level this close to a Budget required to meet pressing public spending demands, but is also deeply concerning at another, in that it seems to confirm that Ireland has become reliant on what is an unsustainable revenue source. The anticipated extra funding is now expected to fill a growing black hole in the funding of the health service, amounting to around €700m. There is clearly something seriously amiss when what is described as a 'technical change in international accounting standards' is relied upon to bail out the health service of a nation. This state of affairs cannot be allowed to continue.
The former Governor of the Central Bank, Patrick Honohan, last week warned that "echoes" of relatively recent past threats to the country's economic security can be heard, citing the massive increases in corporation tax receipts from a small number of multinational firms, especially since 2014, as a new source of revenue risk to have emerged post-crisis. Seamus Coffey, the chairman of the Irish Fiscal Advisory Council, has also expressed serious concern over what he has called a "worrying pattern of large, unplanned increases in Government spending" reliant on volatile corporation tax receipts.
A recent assessment of Ireland's corporation tax code has found that this country meets the highest standards internationally - Ireland is, technically, not a tax haven - however, it has also warned that the recent surge in tax receipts from multinationals based here will continue until around 2020. That is just two years away.