“Have we wasted a corporate tax boom?”

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Sir, – Eoin Burke-Kennedy is, I think, quite correct in suggesting that the recent corporate tax fallout should be seen as Ireland’s version of Norwegian North Sea oil (Business, Opinion, 18 april). But I think it’s instructive to bring the UK into the conversation.

The North Sea oil boom of the 1980s produced huge windfall financial gains for Norway and the UK. Norway has used its windfall to create one of the world’s largest sovereign wealth funds or bad weather funds. Britain squandered its windfall on spending programs that were popular but did not create substantial long-term benefits.

UK oil and gas revenues fell from £10.6 billion in 2008-09 to £0.6 billion in 2019-20. Income has largely dried up and the legacy is made up of incurred expenses that now have to be funded from other sources.

Corporation tax is our North Sea oil. Before the crash, it brought in around 6 billion euros a year. In the four years from 2010, annual corporate tax revenue amounted to around €4 billion. The annual return was around €7-8 billion between 2015 and 2017, and in the last four years it was €10.4 billion, €10.9 billion, €11.8 billion euros and 15.3 billion euros.

Over the seven years from 2015 to 2021, Ireland collected around €43 billion more than would have been obtained if corporation tax revenues had remained at their post-financial crash level, and about 30 billion euros more than the pre-crash revenue level. It was our godsend and would have sown a decent fund for rainy days. But, because our irresponsible politicians followed the British model and not the Norwegian model, we screwed it up.

Why are our politicians doomed to repeat their own most egregious mistakes? The Taoiseach was a member of government who ignored warning after warning that windfall tax revenue from the property should not be used to pay for outstanding current spending commitments. Our current finance minister takes the precaution of warning us that corporate tax revenue can be volatile and unreliable. But “I Told You So” won’t play when his warnings turn out to be prescient. We need him and the other three most senior cabinet members to do something about this.

Paschal Donohoe concluded his review of “In Defense of Public Debt” by observing that he fully agrees with the book’s conclusion that “governments should manage budget surpluses and pay down debt in a timely manner so that they can run deficits and issue debt when the need arises” (Books Reviews, January 8).

Many of your readers will agree whether their supporting authority is Genesis 41.30 or Keynes 1.01. But few of them will become Minister of Finance and have the opportunity to put theory into practice. During the years of plenty, we had a small unbudgeted surplus in 2018, which was nothing more than a rounding error in the national accounts. – Yours, etc.,

Pat O’Brien,

Dublin 6.

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