Ireland collected record total of 23.8 billion euro in corporate tax in 2023
Finance minister Michael McGrath reflected on the health of the Irish economy and said they may need some luck in taming inflation.
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Ireland collected 23.8 billion euro in corporate tax last year, marking another record total as the Irish government emphasised that the pace of growth was slowing.
Ministers warned of the volatile nature of corporation taxes that draw so heavily from a small number of multinationals.
Minister for Finance Michael McGrath said there would be a further “modest increase” in corporate tax to around 24.5 billion euro this year but around 11 billion euro of that would be “potentially windfall in nature”.
Mr McGrath made the comments as his department released Exchequer return figures for 2023, which he said showed “the resilience” of the Irish economy.
There was an Exchequer surplus of 1.2 billion euro at the end of 2023, down from 5 billion euro recorded in 2022.
The drop is due in part to 4 billion euro being transferred from the Exchequer to the national reserve fund.
A one billion euro drop in the general government surplus expected as part of the budget was partly due to additional funding provided to the Department of Health, Minister for Public Expenditure Paschal Donohoe said.
Mr McGrath also warned of the risks to Ireland’s public finances, citing a “weak” and uncertain global outlook, Ireland’s high public-debt ratio and a reliance on 10 multinational companies providing over half of its total corporate tax base.
After four consecutive quarters of GDP negative growth for 2023, Mr McGrath said they were expecting to see an improvement in 2024, and is expecting a surplus of 8 billion euro for the third consecutive year.
Mr McGrath also noted a “modest uptick” in inflation in Ireland but said that it was still predicted to average at 3% over 2024 as he said this year would see cost-of-living conditions improve for people.
“The pathway back to 2% inflation is not necessarily going to be a smooth one, or operate in a straight line – there will be bumps on the road,” Mr McGrath said on Thursday.
“There are lots of things that could go wrong and that could have an impact on a small and open economy like Ireland and the day-to-day costs that people here face, and so, we all need a little bit of luck.
“But certainly based on the assumptions that we have made, it is our view cost-of-living crisis will progressively ease across 2024.”
On corporation tax receipts, he said: “Of course, the most notable feature of the 2023 tax performance was corporation tax receipts of 23.8 billion, or 1.2 billion euro up on 2022.
“This is a new record level of receipts and means the corporation tax is, for the second year in a row, the state’s second largest source of tax revenue, but it is important that we place this in the right context.”
The government’s chief economist, John McCarthy, emphasised that the growth in corporate tax receipts had slowed compared to previous years – with an increase of 5% noted last year and nearly 50% the previous year.
The finance minister noted: “It is clear that the pattern of the last few years, where corporation tax consistently over-performed projections, has not been repeated.”
Mr McGrath said that he and Mr Donohoe had repeatedly warned that these funds are volatile and could not be relied upon.
He said that last year provided a “sharp reminder” of that volatility, when there was a “very significant shortfall” in corporate tax receipts for three successive months before recovering in November and December.
He also said that a global plan to increase corporate tax receipts to 15% would not be felt by Ireland until 2026. Ireland’s current corporate tax rate is 12.5%.
Mr McCarthy said that an estimate that Ireland would gather 2 billion euro less in corporate tax receipts was one figure in a range of options and was calculated around six years ago.
“That of course was at the time when overall corporate tax receipts was in and around 14-15 billion (euro) – they’re obviously 24 billion now.”
Mr McGrath said: “We’re essentially forecasting a steady state in terms of corporation tax receipts for the next couple of years. Beyond that, it does get more difficult the further into the forecast horizon that you go.”