Ireland’s tax authorities have recorded a record €6.3 billion in corporation tax collections for November. This comes as a surprise after concerns were raised about the potential decline in the country’s corporation tax windfall, following three consecutive months of weakening performance. The Irish government plans to establish a sovereign wealth fund with the surplus.
Ireland’s corporation tax revenues have been bolstered by reforms to tax rules, attracting major companies that now pay a significant portion of their global taxes in the country. Finance Minister Michael McGrath emphasised the need to view the November performance in context, noting that while corporation tax is currently 4% ahead of 2022, the era of persistent over-performances is showing signs of diminishing. McGrath highlighted the importance of avoiding permanent fiscal commitments based on temporary revenue streams.
In the mid-2010s, Ireland saw a surge in corporation tax revenues as major companies, including Apple, reorganised their tax structures to pay more taxes in the country. This shift was in response to increasing pressure on large corporations to declare profits in locations with substantial real operations rather than merely choosing low-tax jurisdictions with minimal staffing. Ireland, being a low-tax jurisdiction with significant business operations, benefited from this trend.
Last year, Ireland collected €22.6 billion in corporation tax, a substantial increase from €8 billion recorded just five years earlier. With €22 billion collected up to November this year, Ireland is set to surpass the previous year’s figure. The strong performance in November is attributed to the technology sector, which has outperformed the pharmaceutical sector, which saw a boom during the COVID-19 pandemic.
Despite the global shift toward a minimum tax rate, there is currently no indication of significant behavioural changes among large multinational groups operating in Ireland. However, these firms will experience a rise in their headline tax rate from 12.5% to 15% under the proposed global minimum tax regime.
