What goes up but never goes down? Within the context of the Irish economy, the answer is apparently corporation tax. 

In 2011, at the bottom of the economic cycle, the state took in €3.5 billion in corporation tax. Since then, the figures have climbed and climbed. Last year, it peaked at €15.3 billion, some 22.6 per cent of total tax receipts in that year. By way of context, this is up 41 per cent on figures for 2019. 

The number will grow again this year. The Department of Finance revealed last week that corporation tax receipts amounted to €8.8 billion in the first half of the year, up a colossal €3 billion on numbers for 2021. 

The surging numbers have essentially masked constant overruns in the Department of Health, eased the state through a pandemic, and will soon be used to fund a cost-of-living package in the budget. It has been the government’s economic safety blanket.

But the continued rise of corporation tax receipts – and the government’s increasing reliance on it – raises some pretty big questions. Can it last? And what should actually be doing with the money?

To figure out if it can last, we have to understand why it is soaring. The Department of Finance said last week that the “annual increase in corporation tax reflects the continued strong momentum in activity in the multinational sector, in particular, the ICT and pharma sectors”.

The department is right of course. The overwhelming majority of the tax, slightly more than 80 per cent, came from foreign-owned multinationals. But there is a nuance to the numbers. A sizable amount of the tax is not coming from what could be classified as trading profits, but rather the impact of financial engineering and the onshoring of intellectual property in Ireland.

Thomas traces this trend back to 20015, when Apple, under pressure over its tax arrangements, transferred its intellectual property to Ireland as part of a so-called “green jersey” transaction. As Thomas wrote on Friday:

“Countless multinationals have followed suit since then, meeting a 2020 deadline to kill off double Irish structures. Although some of them chose to onshore their intellectual property to the US rather than Ireland, such as Google and Facebook – and others including Airbnb or Pinterest reverted initial green jersey decisions – massive intangible asset moves to Ireland have led to the situation where corporation tax is as vital to the Exchequer as Vat, and second only to income tax.”

The result of this is that the level of corporation tax coming in is outsized to the real economic activity of multinationals here. Essentially, Ireland is receiving a host of specific windfalls, and it is this windfall nature of the tax that is now worrying policymakers and economic experts.

The Central Bank last week put the windfall at €26 billion between 2015 to 2021, outlining in its latest economic bulletin that as much as €8 billion or just over half of corporation tax receipts might be “unsustainable” or at risk. (The Irish Fiscal Advisory Council, Ifac, says that between 40–60 per cent of annual corporation taxes collected in 2021 is not explained by the performance of the domestic economy).

The bank said the volatility of corporation tax and its concentration among a small number of multinational firms is now one of the chief threats to the public finances.

Speaking last week at the launch of the Summer Economic Statement, the chief economist of the Department of Finance John McCarthy said pretty much the same thing. He argued that concentration risk – one in eight euro collected by the state in tax now comes from ten large multinationals – is now greater than the risk posed by the global tax harmonisation plan.

Sean summed it up the concentration risk pretty neatly in a column last week

“The Irish economy is at risk of a variant of something called the Dutch disease. The Dutch disease happens a dominant industry takes over the entire economy, leaving the country over-exposed to one sector. It’s what happens when an economy’s strengths becoming its weakness.”

Everyone knows we have a potential problem on our hands here. Unfortunately, there is no solution, and as Stephen rightfully pointed out in his column last week, the Summer Economic Statement contains no forecast of the likely effects of a fall in corporate tax revenue, despite multiple warnings within the text that such a thing could happen.

Ifac also called the government out on this in its latest report in May, soberly stating:

“By funding current spending with corporation tax receipts, the Government risks having to adjust current spending down to set the public finances on a sound footing should receipts fall. Unfortunately, the Government has no explicit strategy to reduce this over-reliance.”

The council said that a useful analogy for these exceptional levels of receipts is the oil wealth from which countries such as Norway have benefited. In much the same way, it said Ireland’s remarkable levels of corporation tax receipts are volatile, difficult to forecast, somewhat removed from other activities, and subject to potential reversals in future.

The council proposed either paying down debt quicker or following the Norwegian model and establishing a Rainy Day fund from the excel corporation tax payments (incidentally, the Department of Finance has labelled the excess tax as “froth”).  

According to Ifac: 

“In 1990, Norway decided to start sending its oil and gas revenues to a special oil fund. Various goals included saving wealth for future generations; cushioning fiscal sustainability in case commodity prices reversed; and avoiding the temptation to spend revenues in full. A concern was that spending receipts as they came in would have had procyclical consequences: domestic inflation, appreciation of the domestic currency, and lost competitiveness. Instead, the Norwegian Government opted to use only the returns generated by the oil fund to serve current generations, while preserving its overall value for future generations.”

The council suggests that Ireland do the same. In the short term, it is unlikely to happen. The government is under massive political pressure to offer some comfort to people hit by the cost-of-living crisis, and to support day-to-day spending. Indeed, of the €3 billion corporation tax windfall announced in the Summer Economic Statement, some €2.2 billion will be eaten up by current spending.

In a recent interview with The Currency, Niall Cody, the chairman of the Revenue Commissioners, addressed the issue of the concentration risk around corporation tax. “I hesitate to use the word concern, because I would be far more concerned if it was not coming in,” he told me.

Cody is correct – it is better to get the tax than not to get it. But it is equally important to understand the fundamental risks associated with such a profound concentration of corporate taxpayers. And it is important that we game out what happens if our own “oil wealth” runs dry.


Having reported on multinationals for the guts of 15 years, I thought I had stumbled across most of the tax structures being utilised. Last week, however, Thomas introduced me to another one: the rent-a-CEO tax structure. Through a series of mergers and demergers in the last decade, a global pharmaceutical manufacturer became Irish. To defend itself against a Vat claim, it had to reveal the details of the scheme. We named the companies involved and outlined how it all worked. 

As managing partner of Mazars, Tom O’Brien leads a growing firm in an industry in flux. Speaking to me last week, he talked openly about being a liquidator during the crash, his ambitions for Mazars and the outlook for the Irish economy.

A six-year battle between Kerry Co-op milk suppliers and Revenue has now come to an end in the High Court. The right to subscribe to “patronage shares”, although a receipt of regular trade, will not inflate the farmers’ income tax bills. Thomas had the story.

Spar tycoon John Clohisey joined forces with developer Philip Byrne to acquire Clonskeagh Motors and build an apartment complex on the site. But the €3 million sale hit the ropes when the owners of the Honda car dealership decided to stay in business. Francesca last week reported on the fallout.

We also had detailed financial analysis on DevinishLetsGetChecked and Swrve, while Sinead explained that why she loves Cathie Wood, she would not invest in her fund.