Fiscal council predicts another surge in corporation tax
Ireland could be on the brink of another surge in
corporation tax
, according to the
Irish Fiscal Advisory Council (Ifac)
.
Despite the current uncertainty surrounding global trade, the budgetary watchdog expects receipts from the business tax to rise by about €5 billion from 2026 onwards as additional revenue from the new minimum tax rate of 15 per cent over and above the State's headline rate of 12.5 per cent flows into the exchequer.
Big multinationals with a turnover above €750 million have been liable to pay the higher rate since 2024 but are not due to make their initial payments under the new rate until the middle of next year.
This is expected to boost tax receipts here by an additional €3 billion in 2026 and €2 billion in 2027.
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But there are several other trends likely to drive corporate tax higher in the short term, the council noted in its latest fiscal assessment report.
Most of the biggest taxpayers here are not currently impacted by trade tensions and are forecast to report increased profits this year resulting in higher tax payments, it said.
Some 60 per cent of the State's €28-€29 billion corporate tax base is paid by 10 large firms in the IT and pharma sectors here, which have so far been exempt from US tariffs.
Several of these firms have also been availing of generous tax-cutting capital allowances which are due to run out, meaning they will be liable for more tax.
The council also suggested that the current surge in pharmaceutical exports, which jumped by 154 per cent in the first quarter as firms rushed to get merchandises into the US before tariffs, is likely to result in bigger tax payments this year 'even if exports slow down for the rest of the year'.
As a result, the council said the Government's forecast that corporate tax receipts would remain broadly unchanged at €28 billion in 2026 was 'not realistic'.
While highlighting the potential upside risk to corporate tax, Ifac chairman
Seamus Coffey
said the tax was extremely volatile and could be subject to steep falls as well as increases.
'In the short term, do we see anything that might lead to a downside risk? No, we don't see it but that doesn't mean it's not there,' he said.
'That's very much firm specific ... that's down to the profitability and decisions these companies make, whereas we're looking at broad macro trends that can influence corporation tax,' he said.
Mr Coffey said the State's corporate tax base was currently between €28 and €30 billion but 'go four or five years you could have a forecast range of plus or minus €15 billion.'
In its latest report, the watchdog also took aim at the
Government
's spending plans, claiming they lacked 'credibility'.
It said the Government had originally projected spending in 2025 to be €6.9 billion higher than in 2024 but post-budget overruns meant spending in 2024 ended up being €3.2 billion higher.
Despite this, the forecasts for 2025 remained unchanged. 'This is simply not credible,' it said.
It also noted that current spending grew at a rate of 5.9 per cent during the first five months of this year amid higher-than-expected spends on education, health and justice when the Government forecasts are for a full-year increase of 1.4 per cent.
The council also claimed that the Government was failing to provide medium-term spending forecasts and failing to commit to any meaningful fiscal rule that would anchor annual spending increases.
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