Corporate tax growth rate will stabilise before starting to decline – minister

The rate of growth in corporate tax will begin to stabilise before it will start to decline in a “number of years”, the Minister of Finance has warned.

Paschal Donohoe said that profitability of large companies will start to drop after years of doing well, and their profits will be more associated with the United States.

He made the comments after the Government reported a sharp increase in corporate tax in June.

Exchequer returns, published on Thursday, for the last six months reveal that corporate tax generated 7.4 billion euro last month, which was 1.5 billion euro up from May.

During the first half of the year, the exchequer recorded a surplus of 4.5 billion euro, an increase of 1.4 billion euro compared to the same period last year.

However, Mr Donohoe said the high figures serves as a reminder of the “extreme volatility” in revenue stream.

There had been a drop in receipts in May following a heightened concern over US tariffs and new trade policies.

Mr Donohoe said that corporate tax receipts will begin to stagnate and then fall because of trade or global tax reform.

“It is difficult at this point in time to give an exact point of which I expect to see decline to begin to happen,” the Fine Gael minister said.

“But what I’m convinced of is the decline will take place.

“I believe what we will see is that we will see the growth that we’ve had in the last few years begin to stabilise.

“I saw some evidence of that last year when we actually missed our revised corporate tax forecast for 2024 by a billion euro.

“Up to the end of May, we were around 580 million euro behind what we expect it to be.

“I believe, and I’m convinced, that we will first stabilise and then begin to decline.

“The broad, I think, trigger for that will be, we will see in the world that we’re in at the moment, the profitability of large companies either begin to stabilise and then decline after many years of doing well, or you will see their profits begin to be associated more and more with the US.

“That will either happen because of trade or will happen because of global tax reform.

“Last year was a sign to me of how that will begin. It was a high figure, but it was below where we thought it would be and that is why, if there is one thing that we are capable of doing, which we are, Jack and I are, is that we need to respond back to the issues of today

“But we have to run large budget surpluses, which we are doing, and then put them in our two funds.”

He said he could not confirm when the stagnation will begin to materialise, saying it could be a number of years away.

“I think there was a point in time which I could give you great assurance as to what that could be but with the way in which the global economy is changing at the moment, a lot of it is due to political decisions,” he added.

“It’s harder for me to give an exact point at which I think that could happen.

“I didn’t anticipate that we would see the kind of volatility around the rules of trade that we are now seeing at the moment, and the scale of tariffs from some parts of the world now become permanent.”