We all know how concentrated corporation tax receipts are, with 10 multinationals paying over half of last year’s record haul of €15.3 billion. This is well acknowledged in all branches of government – Thomas most recently reported on the Central Bank analysis of this phenomenon. 

The Department of Finance repeated the exercise in its Annual Taxation Report last week, but also added another strand that looked in more detail at the structure of personal income tax receipts.

Here again, the concentration in Exchequer revenue reliant on the presence of (mostly American) multinationals is striking. One third of all income tax was paid by the employees of foreign-owned multinationals in 2020. Another 9 per cent came from those of “Irish-owned multinationals”, which we know to include foreign corporations that performed tax inversions to Ireland. 

“While much commentary has focussed on the potential loss of corporation tax receipts in the event of a shock to the multinational sector, i.e. a sudden reduction in FDI, this would also result in a very substantial loss to income tax (and PRSI) receipts,” Department officials warned in the report. “The increasing share of tax receipts accounted for by large multinational firms as such represents a significant vulnerability for the public finances via at least two channels.”

In his presentation of the report, Minister for Finance Paschal Donohoe said there was no sign of such shocks – quite the contrary. “Since the start of last year, if we have seen a very strong performance in income tax receipts within our economy, and this is momentum and progress that has continued right through into the summer of 2022. All the report is simply acknowledging is the importance that the multinational sector plays not just in corporate tax receipts but also, because the jobs in the multinational sector tend to be well paid, the contribution of those jobs to our personal tax receipts as well,” he said.

Yet the risk is there, and it has multiple ramifications. Donohoe himself acknowledged the importance of both corporate tax and income tax’s “strength” in keeping the Exchequer afloat during the turbulence of the past three years. “Those tax strengths were particularly demonstrated during the pandemic, in which we saw how we tax the corporate sector, we saw the nature of our income tax system all play a really important role in tax receipts, in those really important parts of our tax system bearing up. So, these are parts of our tax system that support enterprise, are fair and are effective. But the report also makes the point that we need to be very careful regarding the management of our tax policy in the time ahead,” he said.

In shoring up the public purse, Ireland’s brutally progressive income tax system, with just two tax bands, has reduced the widening income gap between rich and poor households. The Annual Taxation Report shows that, on a gross “market income” basis, Ireland is the fourth most inequal of 23 compared OECD countries. But after taxes and social welfare transfers are taken into accounts, it becomes the fourth most equal of them.

This is because just 500,000 high earners, many of them employed by multinationals, pay three quarters of all income tax. This money goes towards supporting those who need welfare supports. 

Among the possible “shocks” to this revenue base, international competition on income tax is emerging as one of the most tangible ones. While Ireland won the battle on corporation tax attractiveness many years ago, the national SARP incentive for encourage highly paid employees to move here is facing serious rivals. 

A report by the EU Tax Observatory on new forms of tax competition last year found that there were 28 SARP-like schemes operating across the EU to attract big individual taxpayers to various countries. This number had nearly tripled from just 10 in 2000. Researchers assessed the “magnitude of tax benefit” for each scheme and gave SARP the lowest score of 1. By contrast, various schemes in place in Mediterranean EU countries scored the maximum of 4. (The EU Tax Observatory, which advocates against tax incentives, did not see this as a good thing. The score contributed to an overall “harmfulness” ranking, in which Ireland’s SARP was placed among the lowest in Europe.)

Portugal now offers a 20 per cent low-income tax rate to people who move there to work in high-value industries, such as the technology sector until now focused on Ireland. Italy is a champion of personal tax incentives for highly paid and qualified workers, and the country is now almost certain to secure the new Intel chip factory once hoped for in Ireland. 

As the battle for talent replaces the quest for the lowest corporation tax rate, this is the foreign investment environment we are now competing in.


Elsewhere last week, Sean had a fascinating interview with Niall Gaffney, CEO of Ireland’s largest office landlord IPUT. If he is worried about the rise of working from home, he is certainly not letting it show. “You don’t bring people to Dublin to work from an apartment, or to work from home. You bring them to Dublin so they learn, they grow, they evolve, they innovate, they add value,” he told Sean.

The story of Brian McDonagh, the Apple objector who dreamed of building Ireland’s biggest data centre, can be read as a morality tale about knowing when to quit. Francesca had a long-read on the slow decline of a would-be data mogul.

To complete its conversion from feed manufacturer to green ag-tech solutions provider, Owen Brennan’s group needs more finance – and to attract new investors, it has promised to favour them in a future sale of the business. Will they match the valuation put on the group in recent internal transactions? Thomas unpicked the detail.

Louise Grubb’s Triviumvet is developing a portfolio of veterinary products for pets that will both improve the lives of dogs and cats. It has just closed a third funding round – and the list of backers is both extensive and impressive. She talked to Tom.

Nick Cotter has been in business with his brother Jack since he was 10. Having grown local firewood and organic lamb enterprises, they are now commercialising a new livestock health technology with worldwide potential – while still in college. He spoke to Thomas on our weekly podcast.