A report from the Department of Finance has said 'the scale and speed' of any reduction in the presence of the ICT sector here ‘could potentially have implications’ for the State’s finances.
Its Annual Taxation Report, published this afternoon, says the ICT sector now accounts for 35% of the corporation tax collected and around 10% of income tax revenues.
It says the sector appears to be in a process of ‘right-sizing’ or going back to a more sustainable number of employees and business following a rapid expansion during the pandemic.
The report says €83.1 billion was collected in tax last year. This was the highest level ever. Tax revenues are now almost €24 billion or 40% above pre-pandemic levels.
Corporation tax receipts are now more than double pre-pandemic levels. In 2022, €22.6 billion in corporation tax was collected, up almost 50% on 2021 and making it the State’s second largest source of revenue.
The top ten corporate tax paying companies accounted for nearly 60% of corporation tax last year. The report cites analysis by the Irish Fiscal Advisory Council which suggests just three large companies pay one third of corporate tax.
The report also observes certain trends emerging in taxation.
Motor fuel duties as a share of excise are on a downward trend, due to policy decisions, while revenue from carbon tax is increasing. Also, the downward trend in the number of people smoking has been offset by increases in tax rates on tobacco.
And Deposit Interest Retention Tax, or DIRT tax, has become a much less important source of tax revenue.
Speaking at a press conference to launch the report, the Minister for Finance, Michael McGrath said he would make a ‘policy statement’ on corporation tax before the Budget.
The 12.5% rate on corporation tax is due to be increased to 15% for companies above a certain size, under an international agreement brokered by the OECD.
He also said plans were well underway on a new state investment fund to save so-called ‘windfall’, or temporary, corporation tax receipts.
The Department of Finance believes around half of the over €24 billion in corporation tax expected to be collected this year could be windfall in nature.
On bank profits, the Minister repeated his intention to renew the Bank Levy next year and that this negates the need for any other type of windfall tax on banks.
He also said he was looking at the scope of the banking levy.
