The Government is drawing up plans to protect the country from the risk of a large multi-national firm reducing its tax payments in Ireland after new research by the Irish fiscal watchdog found three businesses paid about a third of Ireland's corporation tax between 2017 and 2021.
The paper by the Irish Fiscal Advisory Council (IFAC) found this totalled €5.2 billion in 2021 and based on provisional results it expects the figure was even higher last year.
It means that the three unidentified firms accounted for 8% of total tax revenues overall in 2021, up from 5% in 2017.
Previously, Apple has said it is the biggest taxpayer in Ireland.
The data confirming the level of concentration has prompted IFAC to reiterate warnings that the Government must be careful not to become dependent on bumper corporate tax receipts for day-to-day spending.
It also recommends that the performance of these three businesses in particular must be closely monitored.
"This new analysis shows how dependent Irish corporation tax receipts are on a handful of big multinational companies," said Sebastian Barnes, Chairman of the Irish Fiscal Advisory Council.
"It underlines that the Government should not use risky 'excess' corporation tax payments to fund permanent spending increases or permanent tax cuts."
We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences
The council has also backed the Government's plans to place excess corporate tax takings in a special reserve.
"Saving these receipts in a National Reserve Fund would help to prepare Ireland for future challenges," Mr Barnes said.
The paper, authored by IFAC economist Brian Cronin, draws on publicly available financial statements and relies on estimates where data is not available.
It uses this information to build an extended list of corporate groups or firms who it claims could be among the highest corporate taxpayers in this country.
The analysis states that in 1984 just 4% of Ireland’s overall tax take came from corporation tax, but this had risen to around a quarter of total receipts by last year.
According to Revenue data, Ireland’s corporation tax takings are heavily concentrated in a small number of large foreign-owned multinationals.
In 2022, just ten corporate groups accounted for three fifths of all corporation tax receipts.
The data indicates that the largest corporation taxpayers are largely in the ICT and pharma-chem sectors, with these two groups accounting for more than 90% of the corporation tax paid by the top ten groups in 2021 and between 84% and 91% in the four years before that.
The paper estimates that the top ten businesses paid €8.3 billion in corporation tax here in 2021, close to the official outturn reported by Revenue of €8.5 billion.
The analysis indicates the identities of the highest paying businesses among the top ten payers remain broadly unchanged year on year, although it is likely that there is some churn among groups at the lower end of the top ten, the paper says.
IFAC and others have warned of the risks of Ireland becoming overly dependent on what could be transitory corporation tax receipts.
The council says a range of factors could impact on the income from this source, including changes to senior management, ending of patents, group restructurings, regulatory changes and international tax changes.
It also points to pivots to new products, sudden changes in consumer preferences or sharp changes in profitability as other potential influences.
"Given this level of concentration, one-off firm, or sector-specific shocks are likely to be some of the most important drivers of fluctuations in the volume of corporation tax receipts," the paper concludes.
"Therefore, to better understand the origins of Ireland's corporation tax revenue boom, policymakers should not focus exclusively on economy-wide indicators, but also on the specific activities, performance, and group structures of the largest taxpayers."
The Minister for Finance said the IFAC paper underlines the need for Ireland to be particularly careful with these receipts.
"This level of concentration is a clear risk to our finances that cannot be ignored," said Michael McGrath in a series of tweets.
"This is why I'm developing proposals for a long-term savings fund to make our finances safer and more sustainable," he added.
Minister McGrath said corporation tax is a volatile source of revenue and it can not be assumed the windfall receipts currently being collected will continue indefinitely.
"The bottom line is putting funding away will reduce the burden of tax on current and future generations over the years ahead," he said.
He also said that plans for the fund will be brought to Cabinet in the coming weeks as part of the Summer Economic Statement.
But he said as well as the fund, other uses for the money would be considered, including the possibility of paying down the national debt and opportunities for increased public capital investment in areas where capacity is not the main constraint and where infrastructure can be improved.
Meanwhile, Minister for Public Expenditure Paschal Donohoe said while the issue is "a risk" the coalition is taking steps to address it.
Minister Donohoe said Ireland's budget surplus is likely to protect the country from any potential issues the situation could potential cause, adding Government is drawing up plans for a new fund to address any problems if they arise.
"This is the very reason why the Government has set the target of running budget surpluses in the first place," Minister Donohoe said.
"It's the reason why Minister for Finance Michael McGrath is now preparing proposals regarding a fund we would set up that would protect us from the risk of a large company no longer paying the level of tax they are paying in Ireland.
"It is a risk, but it's a risk we've made a massive step forward in now dealing with because we're now running a budget surplus.
"If we were in a situation where we were still borrowing or in a situation where we needed this tax to pay for our day to day spending, we would now have a significant risk. But we're not in that situation.
"We're in a situation for this year where it's very possible we could have a surplus of €7-10bn or a larger surplus even next year, and the Government will have to take this risk into account when we're preparing budget 2024.
"But this is the reason why we want a surplus so we don't become reliant on a single company to pay a large share of the taxes that in turn we need to pay for projects like this," he said.
With additional reporting by Fiachra Ó Cionnaith
