Corporation tax growth will stagnate and decline, Finance Minister Paschal Donohoe warns

By John Burns And Tabitha Monahan

Corporation tax growth will stagnate and decline, Finance Minister Paschal Donohoe warns

Paschal Donohoe said the -profitability of large companies will start to drop after years of doing well. He also warned that their profits will be more associated with the United States.

Mr Donohoe made the comments even as the Exchequer received a boost, with the amount of corporation tax paid rising substantially in the key month of June.

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A total of 鈧7.4bn was paid last month, 鈧1.5bn more than in June last year.

Overall, tax revenues amounted to 鈧47.7bn in the first half of the year, not including the Apple settlement ordered by the European Court of Justice.

This was 鈧3bn ahead of the same period last year, or up 6.7pc.

But Mr Donohoe said that corporate tax receipts will begin to stagnate and then decline because of trade or global tax reform.

鈥淚t is difficult at this point in time to give an exact point of which I expect to see decline to begin to happen,鈥 the Fine Gael minister said. 鈥淏ut what I鈥檓 convinced of is the decline will take place.

鈥淚 believe, and I鈥檓 convinced, that we will first stabilise and then begin to decline.鈥

I didn鈥檛 anticipate we would see the kind of volatility we are now seeing

Mr Donohoe said the broad trigger would be that 鈥渋n the world that we鈥檙e in at the moment, the profitability of large companies either begins to stabilise and then decline after many years of doing well, or you will see their profits begin to be associated more and more with the US鈥.

鈥淭hat will either happen because of trade or will happen because of global tax reform.鈥

He could not confirm when the stagnation will begin to materialise, saying it could be a number of years away.

鈥淚 didn鈥檛 anticipate that we would see the kind of volatility around the rules of trade that we are now seeing at the moment, and the scale of tariffs from some parts of the world now become permanent.鈥

Income tax continues to be a stellar performer, reflecting an economy with virtually full employment.

Receipts of 鈧17.4bn under this heading are also up on last year, by 鈧700m.

Vat receipts of 鈧11.6bn are up by 鈧600m, while corporation tax at 鈧13.1bn is over 7pc, or almost 鈧1bn, ahead of where it was at this time last year. Its strong performance in June followed a 鈧1.1bn decline in May, and reflects the continuing volatility of these receipts.

Government expenditure continues to keep pace with tax revenues, however. Total gross voted expenditure in the first half of the year amounted to 鈧50.9bn, up by 鈧3.8bn or 8.2pc on last year, and ahead of profile by 鈧300m.

Meanwhile, Taoiseach Miche谩l Martin said the next budget will have a heavy focus on capital investment including water and roads as 鈥渂ig-ticket items鈥.

We want our budgets to be heavily focused on capital investment and infrastructure

鈥淲e want this Government to really take decisions that will transform infrastructure,鈥 Mr Martin said.

鈥淲ater is the next utility that will demand an awful lot of capital, public transport, then, and roads 鈥 and so they鈥檙e big-ticket items.

鈥淪o we want our budgets to be -heavily focused on capital investment and infrastructure investment.

鈥淭hat means, then, perhaps a more focused, tighter situation on expenditure,鈥 he added.

Aside from capital expenditure, 鈥渢he budget priority will be housing, it鈥檒l be disability, child poverty and education,鈥 the Taoiseach said.

Acknowledging the increased cost of running schools, Mr Martin said he would expect supports for schools to be included in the next budget.

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