The finance minister has warned of the dangers of relying on high levels of corporate tax revenue, saying they create an “artificially benign image” of public finances.
Paschal Donohoe said there was a clear need to reduce the country’s reliance on corporate tax revenue.
Speaking at the National Economic Dialogue in Dublin Castle, Mr Donohoe said company tax revenue now amounted to 1 euro for every 4 euros collected in tax revenue from the Treasury.
He said that figure greatly exceeds historical and international standards.
“In a world that has become so susceptible to unforeseen shocks, it is even more important that we prepare now for the risks we know are coming,” Mr. Donohoe added.
“There is a clear need to reduce our dependence on corporate tax revenue, which now represents 1 euro for every 4 euros collected in Treasury tax revenue, a figure well above historical and international standards.
“These excess revenues present an artificially benign picture of public finances.
“Furthermore, half of corporate tax revenue comes from just 10 large corporations. In other words, about 1 euro out of 8 euros of total tax collected by the State comes from a very small number of companies.
“We must be alert to the risks inherent in this level of concentration.
“Our success in attracting high quality multinational companies to Ireland has paid off, creating well-paying jobs and increasing our tax revenue.
“But concentration risks as well as changes in the international tax landscape mean that we cannot rely on this revenue stream forever – we must not create permanent expenditures on transitory revenue streams.”
The government is meeting today with representatives from various businesses and industry groups to discuss the upcoming budget in October.
Participants at the event include representatives from community, voluntary and environmental groups, businesses, unions, research institutes and academia.
Meanwhile, Taoiseach Micheal Martin said that while Ireland rebounded “strongly” from the financial and social pressures of Covid, he warned the international economic outlook was “very serious”.
“Thanks to our efforts over the past two years, we are better positioned than many others,” Martin added.
“That does not mean, however, that the period ahead will not be difficult.
“As the pandemic recedes unevenly around the world, we have seen the emergence of inflationary pressures.
“This situation was subsequently exacerbated, to a very large extent, by the illegal and reprehensible Russian invasion of Ukraine – with, in addition to the terrible humanitarian impact, its effect on international flows of energy and materials raw.
“With this invasion, inflationary pressures have become a real challenge for households and businesses in Ireland, bringing with them great worries and worries.”
Mr. Martin told delegates that the war in Ukraine was threatening international trade.
“This marks an acceleration of the trend, which we have also seen during the pandemic, of outsourcing and relocation and will impact future global flows of trade and investment,” he added.
“Recent steps taken by the UK government regarding the protocol can only add to the uncertainty at this time.
“More recently, the European Central Bank has reduced its growth forecasts and sharply raised its inflation projections.
“Interest rates will start to rise gradually from July, which means the cost of borrowing for households and businesses will also rise.
“The truth is that we don’t know what might happen in the global economy in the months and years to come – but there are clear dangers already apparent within the eurozone and other developed economies. .
“These trends carry significant risks for an open and trading economy like ours.
“As a country, we have benefited enormously from globalization, which has allowed us to become a successful producer and exporter of knowledge-intensive goods and services, both through our local and foreign direct investment companies. .
“Having benefited greatly from international trade and integration into the global economy, we will not be immune to international pressures and developments.”