Budget day looms amid first hints of uncertainty over corporation tax

Easily lost in the bumper corporation tax numbers published with Friday’s exchequer returns was the admission by the Government that the State will not collect as much corporation tax this year as it had expected.The number will be up for sure – hardly surprising given that the headline rate for some of our largest multinationals has risen to 15 per cent from 12.5 per cent – but it will fail to match Government projections.Back in April, the Department of Finance anticipated corporation tax receipts would come in at €35.3 billion. As recently as last month, it was reported that figures prepared for Taoiseach Micheál Martin and Tánaiste Simon Harris suggested that number would be exceeded by a wide margin.Now, just weeks later, it has been revised down to €34 billion, fractionally below the fairly conservative estimate in last year’s budget white paper.READ MOREAddressing the issue, even as the department unveiled an unexpected €3 billion take from the business tax in September, a spokesman said some payments expected this year would not now arrive until early next year. [ Budget Q&A: Submit your questions to our expert panel on budget dayOpens in new window ]That is very likely but as Harris and his ministerial colleague Jack Chambers put the finishing touches to the budget package for 2027, the first hint of uncertainty about the outlook on corporation tax suggests the time for playing fast and loose with “windfall” corporation tax revenue is coming to an end.No one should need the Economic and Social Research Institute think tank or the budgetary watchdogs at the Irish Fiscal Advisory Council to realise that using exceptional tax income to fund recurring day-to-day spending is simply irresponsible, especially in a State just one generation on from a catastrophic international bailout.This time last year, in the budget white paper, the then finance minister Paschal Donohoe saw strong growth in corporate tax underpinning his budgetary arithmetic, alongside income taxes. Donohoe did add that he expected the tax to top out at some stage. That may be sooner than we think, especially as we are so reliant on a small cohort of companies.Just three companies, Eli Lilly, Apple and Microsoft, account for close to half of all business tax income. A few years ago during the Covid pandemic, Pfizer would have featured in that sentence. Its subsequent travails illustrate just how fast fortunes can change – and how exposed we might be.As for income tax, that is certainly delivering on Donohoe’s expectation for now, but even there, the employment outlook is clouded by concerns over geopolitical factors and the impact of artificial intelligence.[ The issue that keeps Simon Harris awake at nightOpens in new window ]Regardless of political party, the focus of every deputy in the Dáil in advance of budget day is on spending, not sound fiscal practice. Politically, expectations have been raised; economically, we are mortgaging the future of our younger generations.