DUBLIN: Ireland’s tax take finished 2017 slightly ahead of target thanks to another record return from corporate tax receipts that the finance minister has cautioned may not continue to increase at such speed in the future.
Ireland has consistently beaten its revenue target in recent years as fast economic growth boosted income tax and VAT while the country’s lure as a location for big multinationals increased the contribution of corporation tax.
Tax revenues recovered from a disappointing first half to finish the year 0.2 percent, or 116 million euros (103.19 million), ahead of target. The outpeformance was completely driven by corporate tax, which grew by 6.3 percent or 486 million euros.
That meant Ireland collected a record 8.2 billion euros from companies last year, a more than doubling over the last five years. That has made it the third biggest tax category in the overall code, representing 16 percent of all tax collected.
Finance Minister Paschal Donohoe said last month that Ireland will need to “take great care” in forecasting the trajectory of future corporate tax receipts due to tax changes around the world and especially in the United States.
Ireland’s low 12.5 percent corporate tax rate has long made it a hub for multinationals from the U.S. in particular where the equivalent rate has been cut to 21 percent from 35 percent in the largest change to U.S. tax laws since the 1980s.
While some of Ireland’s other tax categories finished below target for the year, they all rose year-on-year, contributing to a 6 percent or 2.8 billion euro overall increase on 2016. Spending finished the year 0.8 percent above profile.
Ireland recorded an overall surplus of 1.9 billion euros versus a 1 billion euro deficit a year ago, although that was primarily due to June’s 3.4 billion euro sale of a stake in state-owned Allied Irish Banks <ALBK.I>.
Excluding the AIB share sale and other one-off transactions, the Finance Ministry said the underlying exchequer position showed a year-on-year improvement of 1.1 billion euros.