State’s tax base now 60% big­ger than in 2003

CSO fig­ures show cor­po­ra­tion tax and in­come tax re­spon­si­ble for growth

The Irish Times - Business - - BUSINESS NEWS - EOIN BURKE-KENNEDY

The amount of money the Gov­ern­ment gen­er­ates in tax has jumped by nearly 60 per cent in the past 15 years. But VAT gen­er­ates less than it did at the height of the boom more than a decade ago.

Fig­ures from the Cen­tral Statis­tics Of­fice (CSO) show to­tal tax re­ceipts last year amounted to a record €50.7 bil­lion. This was €18.6 bil­lion more than the €32.1 bil­lion col­lected in 2003 and €3.5 bil­lion more than the €47.2 bil­lion col­lected in 2007 just prior to the fi­nan­cial cri­sis.

The two largest com­po­nents of the Gov­ern­ment’s tax base are in­come tax and VAT.

The fig­ures show that while in­come tax has been grow­ing since 2011 in tan­dem with the re­cov­ery in em­ploy­ment, VAT still brings in less than it did at the peak of the boom.

In 2017, in­come tax gen­er­ated €20 bil­lion, which was more than dou­ble the 2003 level and 47 per cent more than in 2007.

Re­tail sec­tor

VAT, which re­flects the strength of the re­tail sec­tor, brought in €13.3 bil­lion for the Gov­ern­ment last year, but this was less than in 2007 when it net­ted the ex­che­quer €14.5 bil­lion.

The slide prob­a­bly re­flects the Gov­ern­ment’s de­ci­sion to in­tro­duce a lower VAT rate for the hos­pi­tal­ity sec­tor dur­ing the re­ces­sion.

While much of the ex­pan­sion in the tax base has come from in­come tax, there has also been a mas­sive spike in cor­po­ra­tion tax.

Busi­ness tax re­ceipts have nearly dou­bled since 2012 to €8.2 bil­lion and are on course to hit a record €10 bil­lion-plus in 2018 amid a ma­jor trans­fer of multi­na­tional as­sets here in the wake of a clam­p­down on global tax avoid­ance and in­creased cor­po­rate prof­itabil­ity gen­er­ally.

About 40 per cent of busi­ness tax re­ceipts in the Re­pub­lic are gen­er­ated from a hand­ful of com­pa­nies, un­der­stood to in­clude tech gi­ants Ap­ple, Mi­crosoft, Dell, Google and Or­a­cle.

The highly con­cen­trated na­ture of the cor­po­ra­tion tax base leaves the pub­lic fi­nances ex­posed to changes in the in­ter­na­tional busi­ness en­vi­ron­ment and the Gov­ern­ment has been warned by the Ir­ish Fis­cal Ad­vi­sory Coun­cil not to use the cur­rent boom to fund per­ma­nent day-to-day spend­ing mea­sures. Much of the re­cent tax wind­fall has been used to cover over­runs in health.

The CSO fig­ures show the size of ex­cise duty, once the Gov­ern­ment’s third largest tax cat­e­gory but now fourth be­hind cor­po­ra­tion tax, re­mained about the same in the pe­riod un­der re­view.

The un­du­la­tions of Ir­ish tax were con­tained in the CSO’s Mar­coeco­nomic Score­board for 2017, which ef­fec­tively com­pares var­i­ous Ir­ish eco­nomic in­di­ca­tors against EU thresh­olds.

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