Finance Minister Michael McGrath has a complex task in conveying the Coalition’s monetary standing. He desires to dispel perceptions from different departments and the general public that the Coalition’s financial leeway is vast or that there is a considerable corporation tax reservoir available to the Coalition. This comes at a time when corporate tax brought in a record €23.6 billion for the exchequer last year. As such, he constantly reminds people about the “inherent unpredictability” of the corporate tax and the potential hazards of linking it with existing spending.
Moreover, McGrath aspires to project an image of fiscal caution as a responsible Finance Minister, which involves disregarding demands on the public funds and maintaining budgetary discipline. In a year with elections, this often conflicts with the political agenda of the Government which courts voters with a generous budget.
Part of the cautious image also involves portraying the Government’s robust €8.3 billion budget surplus last year, as highlighted in the most recent financial figures from the Central Statistics Office, as a product of the Coalition’s meticulous handling of the finances. This is challenging when it’s apparent to all that the Government would be facing a significant fiscal shortfall, if not for the exceptional influx of corporate taxes that it has little control over.
There is also an international aspect to consider. For its low corporate tax level and for enabling aggressive tax planning by multinational corporations, Ireland has been labelled a tax haven. However, the implementation of a global minimum tax rate of 15% as part of the OECD’s BEPS process, has partly offset this criticism.
But if, as predicted, Ireland’s corporate tax pot grows noticeably under a new globally agreed minimum rate, the Government may face additional criticisms. Thus, although McGrath aims to emphasise the Government’s strong financial standing, he’d rather not draw attention to the corporate tax, creating a delicate line to tread.