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Ireland's reliance on Corporation Tax receipts

Kermit.de.frog

Exchequer faces €31bn deficit by 2030 if corporate taxes fall

Modelling by the Department of Finance highlights the ‘magnitude of the vulnerability’ of the state’s reliance on windfall corporate taxes

https://www.businesspost.ie/news/exchequer-faces-e31bn-deficit-by-2030-if-corporate-taxes-fall/

No exaggeration to say this could be a disaster in the making and I think every right thinking person should be very angry at the giveaway budget. This is 2008 all over again.

The opposition parties wanted to spend more.

Obviously lessons from the trauma of 2008 - 2010 have not been learned.

Then it was unsustainable housing market income that ultimately led to the IMF bailout. Same thing is going to happen again.

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babyducklings1

https://www.boards.ie/discussion/comment/123307795#Comment_123307795

What give away budgets, electricity credits were really good and helped working families and everyone but cost of living is high here. But whatever happens hopefully we’ll weather the storm.

threeball

https://www.boards.ie/discussion/comment/123308159#Comment_123308159

Things aren't going to be nearly as bad as the doomsayers suggest. Trump is wrecking the US economy far faster than any MNC could pivot even if they wanted to. I doubt his tariffs last 6months before he has to rescind them.

Hopefully it's the kick in the hole our government needs to start our diversification and end our reliance on MNCs. Yes they should be part of our economy but they shouldn't account for the percentage they do. It's like walking into a casino, putting all your money on red, winning and expecting it to keep coming up. It's a crazy strategy.

Kermit.de.frog

https://www.boards.ie/discussion/comment/123308159#Comment_123308159

It's not just the one-offs (a ridiculous policy in the first place) which were about €2bn. That budget was nearly €11bn in total. That is over. And it was a mistake that could cost us dearly if/when surplus turns in to massive deficit.

Podge_irl

https://www.boards.ie/discussion/comment/123308259#Comment_123308259

Hopefully it's the kick in the hole our government needs to start our diversification and end our reliance on MNCs. Yes they should be part of our economy but they shouldn't account for the percentage they do. It's like walking into a casino, putting all your money on red, winning and expecting it to keep coming up. It's a crazy strategy.

You want us to tell them to go away or something? People keep saying this and it just doesn't make any sense because there is no way to replace them indigenously to anything like the same scale. So either you just want less of them and to have an active policy of discouraging investment in Ireland or you have to accept the status quo.

threeball

https://www.boards.ie/discussion/comment/123308812#Comment_123308812

There are plenty of opportunities to develop indigenous industries on smaller scale that will be much more robust and longterm for the country. Its not a matter of telling them to go away, thats nonsense. But we don't support local industries to the same level we support foreign ones. Companies come here and have huge money thrown at them to invest or are given premises with long term leases that are paid for.

I know from having dealt with EI myself and spoken to many Irish entrepreneurs that their experience has not been so positive. Difficult to access, difficult to deal with and often unrealistic expectations on time to get an ROI. Many chose not to go back for further supports and many didn't even get the door opened in the first place. Only the companies with potential to grow quickly (the so called High Potential Start-ups) float their boat and most of their business moves to the US within a year or two anyway.

You don't put all your eggs in one basket. We did it with property and we've repeated the mistake with FDI.

Podge_irl

https://www.boards.ie/discussion/comment/123308994#Comment_123308994

We have indigenous industries and we absolutely support them. I would be curious for an example of free long-term leases being given to foreign companies also, as I struggle to believe that.

There is obviously going to be a different approach taken between support for established multinationals who are essentially guaranteeing returns vs having to pick which of the multitude of indigenous startups to support, most of whom will fail. Ireland does not lack in indigenous, large companies. However, when they become successful they are as tenuously linked as any FDI. Smurfit Westrock or CRH will move out of Ireland just as readily as Medtronic if it comes to it.

threeball

https://www.boards.ie/discussion/comment/123309026#Comment_123309026

You don't get it at all. Smurfit and CRH aren't even in my scope of thinking. We have plenty of companies, which would produce anywhere between 30 and 300 jobs and would have no aspirations to move outside their own town given the opportunity never mind to the US. These companies wouldn't need to go to Dublin, Cork or Galway to have the population needed to provide Labour and would keep people in rural Ireland.

You say we do support these but i know from personal experience and from talking to others that it is not the case at start up phase unless you are what they consider a HPSU.

The government policy has been to not give proper support to these companies. Instead favouring the big figure FDI who get favourable tax conditions and suck everyone into the orbit of large cities bleeding rural Ireland dry.

Podge_irl

https://www.boards.ie/discussion/comment/123309281#Comment_123309281

You say we do support these but i know from personal experience and from talking to others that it is not the case at start up phase unless you are what they consider a HPSU.

90% of them will fail! With or without government intervention, but if they are given too much support they are nothing but a money sink. The support to FDI is guaranteed income. They are incomparable situations.

I don't even know what you are suggesting the Govt should be doing to aid these companies. Our corporation tax regime and offsetting etc benefits these companies too.

BlueSkyDreams

https://www.boards.ie/discussion/comment/123308259#Comment_123308259

Fair points, but where and how do we diversify?

The economic environment has encouraged all other sectors to grow. Money hasnt been a blocker to growth outside MNCs, so why hasn't it happened.

greenfield21

Despite all the noise around U.S. tax reform, it looks increasingly likely that the much-feared changes to the tax code wont be happening, not that it ever had a chance anway with all the swamp creature lining their pockets. If the text doesn't change, then changes to GILTI and FDII won’t materialize in a way that harms Ireland.

Ireland’s golden goose, American multinationals, can keep laying those tax efficient eggs right here.No gaping hole in corporate tax revenues. It’s business as usual, probably the greatest threat to Irelands whole economic model has been averted as the House will likely flip after mid terms and the window for change is gone.Celebrations will be happening in Government Buildings this week, Ireland's economic prosperity will continue and the status quo holds for years to come. The biggest threat to Ireland averted.

https://twitter.com/Brad_Setser/status/1921554172807127130

BlueSkyDreams

https://www.boards.ie/discussion/comment/123308259#Comment_123308259

There is nothing stopping non-MNC companies from scaling up and producing more corporation tax revenue here.

We dont need to lose any MNC revenue to achieve this.

The question is, where are your new billions coming from?

Kermit.de.frog

https://www.boards.ie/discussion/comment/123438178#Comment_123438178

There is nothing Ireland can do to replace the vast tax take from MNCs. Literally nothing. So for those that talk about being "less reliant" on MNCs what they really mean is a permanent and catastrophic decline in the living standards of every person in Ireland. It's an impossible pipe dream.

The first thing the government needs to do is stop spending the nation's finances like water.

The spending increases in recent years have been reckless and irresponsible.

The government needs to start repairing that this year.

That doesnt mean austerity. It just means no more giveaway budgets and throwing away money like confetti. It means being prudent and sensible with the budget. It means making sure the public understand that we can not go on increasing spending like we have been doing and managing expectations.

There are signs that the message is getting through to the government as the Dept of Finance has been putting up the distress flares and it looks as though next year's budget will be very different from went before based on media reports.

If tariffs presist money should be allocated to protect the most strategically valuable and important sectors like Pharma to maintain jobs and skills and income here.

blanch152

https://www.boards.ie/discussion/comment/123308994#Comment_123308994

What opportunities to develop indigenous industries to the scale that can replace or match the contribution of MNCs? I am not aware of any.

ancapailldorcha

https://www.boards.ie/discussion/comment/123438178#Comment_123438178

Of course there is. The big one is capital but there are other serious obstacles.

Can you name any of these non-MNCs that could expand but choose not to?

BlueSkyDreams

https://www.boards.ie/discussion/comment/123450406#Comment_123450406

I cannot: Which is exactly my point.

If we lose the MNC CT, it is not going to be magically replaced by Non-MNC CT revenue.

If the Non-MNCs could compete with MNCs in terms of CT revenue, the proof of same would already be present in the books of the exchequer.

greenfield21

https://www.boards.ie/discussion/comment/123438053#Comment_123438053

The good news only keeps coming for Ireland, the Republican party have not only retained the incentives for offshoring profits they are now trying to enhance it. The Republican party and Congress openly working against Trump's agenda to enrich big Tech/pharma was always expected.

https://twitter.com/Brad_Setser/status/1926318196035825680

https://twitter.com/Brad_Setser/status/1926318922883571794

greenfield21

Most people had thought Pharma lobby had bought Trump out but in cabinet meeting today he is back to saying pharma tariffs soon. Who actually believes him at this stage... also said he will give a year I think to bring back, more front running so. I don't even think he knows how to bring back pharma. Pharma stock down on the news though so market seems to believe it might happen again 🤔

Marcusm

https://www.boards.ie/discussion/comment/123438053#Comment_123438053

Completely disagree; the decision to exclude subsids of US MNEs from Pillar Two (except QDMTTs which will likely come under pressure) has essentially opened up greater planning opportunities. The ramp up in CT in recent years has been driven by y the relocation of IP here, generally from offshore or less “punitive” regimes. Ireland’s exit tax is ineffective in many cases and I would expect some or much of that IP to migrate back “offshore”. In the interim, Ireland will come under pressure to rescind the QDMTT (top up to 15% on locally generated profits) as it “fought” against it in 2020 and 2021. The capitulation to the US’s demands will herald a new wave of aggressive tax planning and Ireland will be a loser this time.

blanch152

https://www.boards.ie/discussion/comment/123623608#Comment_123623608

We may have bought another few years of bumper corporation tax, but the truth is that that tax base is not sustainable in the long run. At least that is recognised in government.

What is less recognised, and more worrying, is that the income tax base is also largely reliant on high salaries in American MNCs. Unless we start taxing lower incomes, most of which are not taxed at all, we will fall off a tax revenue cliff at some point in the future.

Marcusm

https://www.boards.ie/discussion/comment/123623832#Comment_123623832

Again I disagree, the G7 agreement to gut Pillar Two will accelerate change, ie not bought another few years but reduced those years to 1 or 2. There is no longer an imperative for non-US profits of a US MNEs to suffer a minimum 15% tax (not that Pillar Two achieved that). Just as three years ago, the phrase was “15 is the new zero”, it will be a target to get as close to zero as possible. A number of EU jurisdictions can essentially achieve that and absent IIR/UTPR aspects of Pillar Two, it will create a rush to consider new offshorings. Such profits may be subject. To GILTI but that’s effectively 10.5% and is US tax (thereby facilitating behind the scenes claims of patriotism).

It’s not a reason for many job losses in Ireland as few enough roles truly supported the IP. I agree with you re Irish income tax - if more than half the workforce does not contribute to public services then how ill they be financed. We also have one of the more costly public services in terms of salaries too.

blanch152

https://www.boards.ie/discussion/comment/123624010#Comment_123624010

The only difference between us then is how fast we are approaching the cliff.

brickster69

https://www.boards.ie/discussion/comment/123446710#Comment_123446710

Looks like these large companies might be getting taxed more if it happens, it was announced yesterday according to the FT. I supposed if they get taxed on turnover that would mean less profit.

https://archive.is/2R1lF

Grassy Knoll

https://www.boards.ie/discussion/comment/123446710#Comment_123446710

very sensible analysis, while we may have created problems in being ‘good at FDI’ , they are good problems. The big risk is the political system is monetising every problem it meets with no choices or prioritisation of problems it encounters and ‘easy’ CT receipts are being literally thrown at them.

we have the good fortune to have these monies, the sovereign wealth funds are a superb idea, but I fear not enough money is going into them given the inherently transitory nature of the CT receipts. Think that in a decade or two they could start generating an income stream which could fund public services, demographics, climate change etc, but I’m afraid our political system is more interested in building a ‘champagne lifestyle based on overtime income’ ….

engineerws

https://www.boards.ie/discussion/comment/123308994#Comment_123308994

Going through it with a hpsu. Excellent business case and great support network but nightmare to get VC funded.

threeball

https://www.boards.ie/discussion/comment/123654928#Comment_123654928

You should get a yank passport, they'd be crawling all over you. As a paddy, they dont want to know.