Minister for Finance Michael McGrath said today that the Government will provide an update of the assessment of what the combined effect of the two pillars of the international tax reform will have on Ireland.
Speaking on Morning Ireland, the Minister said that up to now the assessment had been that it would be a net cost of about €2 billion, but he said today that the estimate of the potential downside of the combined effect of the two pillars has increased.
He said this reaffirms the need to be "really careful" with what is done with corporation tax receipts.
Mr McGrath said yesterday's report from the Parliamentary Budget Office on corporation tax shows the risk of concentration in the economy.
"It underlines many of the messages that I, as minister and the Government have been highlighting in relation to corporation tax and in recent months and indeed over the past number of years, the high level of corporation tax receipts that we are collecting is a reflection of the strength of the foreign direct investment sector in Ireland," he stated.
He said the FDI sector employs over 300,000 people in areas such has life sciences including pharma, technology, financial services and a whole range of other sectors.
The Minister said the report very usefully highlights a number of risks that he has been talking about for quite some time, including the concentration risk.
"We have known from Revenue publications, for example, that the top 10 companies contribute almost 60% of all the corporation tax paid, and then the next number of weeks the Revenue will provide further update in relation to the evolving concentration risk," he said.
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He said that reviews "don't get down to the level of individual firms or a couple of firms in the analysis that I or my department do, but we are aware from publicly available information, including the assessment by the Fiscal Advisory Council, that over a period of about four years, about a third of the corporation tax receipts that Ireland has been collecting and can be identified as as coming from three individual companies".
"Whether it be the top three or the top two or the top ten, the overall message is clear - there is a concentration risk. We are dependent on a relatively small number of very large companies who are paying a large proportion of the corporation tax that we are collecting," he cautioned.
He said the Government has identified the volatility inherent in the corporation tax receipts.
"There is a level of risk associated with those receipts. And that is why we have brought forward one of the most important reforms in the management of our public finances for many decades," he added.
Michael McGrath said the Cabinet has approved plans to set up the new Future Ireland fund and the Infrastructure, Nature and Climate Fund.
That bill will be brought to second stage in the Dáil in the next two weeks, he said.
He said this will lessen reliance on a small number of companies when it comes to corporation tax because it avoids the mistake of using receipts that could prove to be temporary, on permanent expenditure or taxation measures.
"These two new funds will play an indispensable part of future proofing the public finances for our country and it is a strategically important initiative and I look forward to bringing it to conclusion in the coming months," he said.
The minister said that the funding from this is coming from surpluses that we are currently earning as a country, largely based on corporation tax, "some of which we regard as windfall in nature.
"We estimate that about €10 billion to €12 billion of what we are collecting every year is potentially windfall in nature. In other words, we cannot rely on it recurring year in, year out. And so we have to be really careful about what we do with those funds," he cautioned.
