New research by the Irish fiscal watchdog has found the same three businesses accounted for about a third of all Ireland’s corporation tax revenue each year between 2017 and 2021.
The paper by the Irish Fiscal Advisory Council (IFAC) found this totalled €5.2 billion in 2021 and based on provisional results it expects the figure was even higher last year.
It means that the three unidentified firms accounted for 8% of total tax revenues overall in 2021, up from 5% in 2017.
The data confirming the level of concentration has prompted IFAC to reiterate warnings that the Government must be careful not to become dependent on bumper corporate tax receipts for day-to-day spending.
It also recommends that the performance of these three businesses in particular must be closely monitored.
“This new analysis shows how dependent Irish corporation tax receipts are on a handful of big multinational companies,” said Sebastian Barnes, Chairman of the Irish Fiscal Advisory Council.
“It underlines that the Government should not use risky ‘excess’ corporation tax payments to fund permanent spending increases or permanent tax cuts.”
The council has also backed the Government’s plans to place excess corporate tax takings in a special reserve.
“Saving these receipts in a National Reserve Fund would help to prepare Ireland for future challenges,” Mr Barnes said.
The paper, authored by IFAC economist Brian Cronin, draws on publicly available financial statements and relies on estimates where data is not available.
It uses this information to build an extended list of corporate groups or firms who it claims could be among the highest corporate taxpayers in this country.
The analysis states that in 1984 just 4% of Ireland’s overall tax take came from corporation tax, but this had risen to around a quarter of total receipts by last year.
According to Revenue data, Ireland’s corporation tax takings are heavily concentrated in a small number of large foreign-owned multinationals.
In 2022, just ten corporate groups accounted for three fifths of all corporation tax receipts.
The data indicates that the largest corporation taxpayers are largely in the ICT and pharma-chem sectors, with these two groups accounting for more than 90% of the corporation tax paid by the top ten groups in 2021, and between 84% and 91% in the four years before that.
The paper estimates that the top ten businesses paid €8.3 billion in corporation tax here in 2021, close to the official outturn reported by Revenue of €8.5 billion.
The analysis indicates the identities of the highest paying businesses among the top ten payers remain broadly unchanged year on year, although it is likely that there is some churn among groups at the lower end of the top ten, the paper says.
IFAC and others have warned of the risks of Ireland becoming overly dependent on what could be transitory corporation tax receipts.
The council says a range of factors could impact on the income from this source, including changes to senior management, ending of patents, group restructurings, regulatory changes and international tax changes.
It also points to pivots to new products, sudden changes in consumer preferences or sharp changes in profitability as other potential influences.
“Given this level of concentration, one-off firm, or sector-specific shocks are likely to be some of the most important drivers of fluctuations in the volume of corporation tax receipts,” the paper concludes.
“Therefore, to better understand the origins of Ireland’s corporation tax revenue boom, policymakers should not focus exclusively on economy-wide indicators, but also on the specific activities, performance, and group structures of the largest taxpayers.”
The Minister for Finance said the IFAC paper underlines the need for Ireland to be particularly careful with these receipts.
“This level of concentration is a clear risk to our finances that cannot be ignored,” said Michael McGrath in a series of tweets.
“This is why I’m developing proposals for a long-term savings fund to make our finances safer and more sustainable,” he added.
Minister McGrath said corporation tax is a volatile source of revenue and it can not be assumed the windfall receipts currently being collected will continue indefinitely.
“The bottom line is putting funding away will reduce the burden of tax on current and future generations over the years ahead,” he said.