The Parliamentary Budget Office (PBO) report has flagged excessive concentration risk in Ireland’s public finances. In 2021, 54.1% of the income tax and universal social charge (USC) payments were made by the top 7.7% of tax units – individuals earning over €100,000 a year. Additionally, multinational employees, making up 35% of the corporate workforce, contributed to 55% of employment-related tax and USC gains in 2022.
The same review highlights the looming risk in corporate tax earnings, with the top 10 corporate groups responsible for 60% of takings in 2022 and 56% predicted in 2023. Authorities have previously been urgered to avoid leaning on corporate tax earnings for regular expenditure due to this hazard.
Forecasts estimate that corporate tax will contribute €24.5 billion to the state purse this year, rising to €25.6 billion in 2025 only to drop slightly to €24.7 billion in 2026. This fluctuation anticipates an impact from the first phase of tax reforms led by the OECD, further underscoring the unsteady nature of these revenue streams.
Multinationals play a pivotal role in the Irish economy, providing a substantial fiscal uplift via various tax streams and thereby calls for a fiscally responsible approach from the government. The PBO suggests making prudent investments in strategic areas such as key infrastructure and implementing structural reforms to ensure the sustainable competitiveness of the Irish economy.
While the Irish economy appears balanced and is heading towards disinflation, it remains susceptible to wider global trading disruptions and internal supply restrictions. Long-term structural shifts due to decarbonisation, demographic transitions, digital transformation, and deglobalisation are adding to this uncertainty according to the PBO.