DUBLIN, Nov 17 (Reuters) – The slowdown in the global tech sector poses a risk to soaring corporate tax receipts in Ireland next year and in particular in 2024, the finance ministry’s chief economist John McCarthy said on Thursday.
Corporate receipts, mainly paid by a small number of large multinational companies whose European headquarters are based in Ireland, have risen by more than 400% in the last 10 years to account for a quarter of Ireland’s entire annual tax take.
McCarthy said corporate taxes could reach 22 billion euros ($22.8 billion) this year, above the 21 billion forecast two months ago, and that he was “more worried” about later years, especially if there is a shock to the ICT (information and communications technology) sector.
“Within our numbers, we do have a slowdown in the ICT sector built in but since we did the budget (in September), I think it’s fair to say the correction in the sector has maybe been a little bit stronger than we might have thought ,” McCarthy told a parliamentary committee.
“There’s certainly a risk to 2023, and more likely, maybe the 2024 corporate tax number, that’s just on where the sectors are going.”
Ireland is hugely reliant on multinationals that employ over 275,000 people, or one in nine workers. Jobs growth among foreign-owned firms – which includes other large sectors such as biopharma, medtech and financial services – hit record levels in the first half of 2022.
However since then a number of tech companies including Facebook parent Meta Platforms Inc (META.O), Twitter and digital payments firm Stripe have laid off Irish staff as part of global cutbacks.
The head of the finance ministry, John Hogan, said he believed the tech cuts were a “realignment” after a period of rapid growth.
Highlighting how vulnerable Ireland’s public finances are to a more severe multinational shock, McCarthy noted that just 10 firms account for 36% of all the tax paid in the country, when the income tax of their highly paid workers are included.
The surge in corporate taxes pushed Ireland’s budget back into a small surplus this year. It expects the surplus to grow to 2.2% of gross national income next year, allowing it to put 6 billion euros of corporate receipts aside into a reserve fund.
($1 = 0.9671 euros)
Reporting by Padraic Halpin; Editing by Toby Chopra and Mark Potter
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