# Increasing Expenditure with Unsustainable Corporation Tax Receipts



## 24601 (4 Jan 2018)

As *reported *yesterday, tax receipts for 2017 ended up slightly ahead of target. Corporation tax receipts made up 16% last year's tax take and grew by 11.6% year on year. Income tax and VAT were down on 2016 but this decrease was offset by the CT growth. 

In light of the fact that the growth in corporation tax receipts was driven largely by about ten giant multinationals it would seem that the planned increases in current public expenditure are underwritten by a very small number of counterparties who could up and leave at any minute or suffer a downturn in performance. The projected CT take for 2017 was €7.65bn but the actual amount taken in ended up being €8.2bn. Growth figures are also skewed by these businesses, so are we back to the mid 2000's again and running our economy on foundations of sand?


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## odyssey06 (4 Jan 2018)

It would be prudent to use the CT windfall for capital expenditure only... or to increase pay down of national debt, rather than using it as the basis for ongoing spending commitments.


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## Purple (4 Jan 2018)

24601 said:


> Growth figures are also skewed by these businesses, so are we back to the mid 2000's again and running our economy on foundations of sand?


In short; yes.


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## 24601 (5 Jan 2018)

Purple said:


> In short; yes.



It seems so blatantly obvious. Why is there no outrage from politicians or the commentariat? Even a modest readjustment in growth downwards coupled with the exit of one or two of the top CT payers could leave us back running hefty current budget deficits for the medium term.


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## Firefly (5 Jan 2018)

I am not as concerned about our dependence on the tax paid by multinationals as I was about tax receipts from the construction industry. Sure, we could have one-off shocks such as Brexit / US tax reductions, but apart from that we have a very wide range of multinationals here, from IT to Pharma and everything in between. During the CT we were reliant on one industry.


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## Brendan Burgess (5 Jan 2018)

24601 said:


> It seems so blatantly obvious. Why is there no outrage from politicians or the commentariat?



Hi 24601

I have raised this on many occasions.  That it's crazy that with artificially high CT returns and very low interest rates, we are still borrowing to run the country. 

* A budget which Charlie McCreevy or Brian Cowen would be proud of…*


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## Firefly (5 Jan 2018)

Brendan Burgess said:


> Hi 24601
> 
> I have raised this on many occasions.  That it's crazy that with artificially high CT returns and very low interest rates, we are still borrowing to run the country.
> 
> * A budget which Charlie McCreevy or Brian Cowen would be proud of…*



Agreed. There is absolutely no reason why we as a country should be borrowing a cent. We have the world's multinationals here and we have no army to speak of. We should be running a massive surplus in fact.


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## cremeegg (5 Jan 2018)

24601 said:


> In light of the fact that the growth in corporation tax receipts was driven largely by about ten giant multinationals it would seem that the planned increases in current public expenditure are underwritten by a very small number of counterparties *who could up and leave at any minute* or suffer a downturn in performance. The projected CT take for 2017 was €7.65bn but the actual amount taken in ended up being €8.2bn.



While we should certainly not be complacent, there are at least two reasons to think that the multinationals will not all up and leave.

Firstly, as Firefly points out the multinationals are in many different sectors, so factors which affect one may not affect all.

Secondly, many of them have significant investment in physical infrastructure, from Intels fab plants to the pharma factories in Cork.


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## Brendan Burgess (5 Jan 2018)

cremeegg said:


> there are at least two reasons to think that the multinationals will not all up and leave.



Agree that they won't all up and leave at the same time,  unless some tax change forces them to do so.

But, the loss of any one of them would be a significant loss to the Exchequer.

We got €8 billion in Corporation Tax last year. How much of this came from the top 10 companies? 

Brendan


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## 24601 (5 Jan 2018)

Brendan Burgess said:


> Agree that they won't all up and leave at the same time,  unless some tax change forces them to do so.
> 
> But, the loss of any one of them would be a significant loss to the Exchequer.
> 
> ...



Around 40% of CT receipts come from the top ten payers.


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## cremeegg (5 Jan 2018)

Firefly said:


> During the CT we were reliant on one industry.



Yes and even that one industry was operating on borrowed money. Construction had reached a point where projects were being financed on the basis that prices would rise during the construction. 

There is no such risk in the present situation regarding multinationals.


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## cremeegg (5 Jan 2018)

24601 said:


> and running our economy on foundations of sand?



A friend of mine when told that his argument wouldn't last as it was built on sand, replied without hesitation, "Yes, like the Pyramids."


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## 24601 (5 Jan 2018)

cremeegg said:


> Yes and even that one industry was operating on borrowed money. Construction had reached a point where projects were being financed on the basis that prices would rise during the construction.
> 
> There is no such risk in the present situation regarding multinationals.



It's concentration risk though, and I'd argue that the risk derives from tax competition rather than the performance of any one or small number of the top ten payers, but in any case there's definitely an over-exposure.


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## Purple (8 Jan 2018)

cremeegg said:


> A friend of mine when told that his argument wouldn't last as it was built on sand, replied without hesitation, "Yes, like the Pyramids."


You should quietly let him know that most of them are built on rock.


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## Purple (8 Jan 2018)

24601 said:


> It's concentration risk though, and I'd argue that the risk derives from tax competition rather than the performance of any one or small number of the top ten payers, but in any case there's definitely an over-exposure.


Agreed, and much of that tax competition is outside our control.
The Multinationals might operate in many different sectors but they are all here for one reason; taxes.


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## cremeegg (8 Jan 2018)

Purple said:


> The Multinationals might operate in many different sectors but they are all here for one reason; taxes.



Is that true ?

It seems to me that some people say that they are only here for the tax breaks and other people say that they are here due to the high quality of our workforce.

Both opinions seem to say more about the people holding them than tell us anything about the actual reason multinational come here.

The "only in it for the tax" brigade seem to think that there is no good reason why 'furriners' would come to our miserable little country it there wasn't a tax break.

The "our highly educated workforce brigade" seem to be on commission from IDA.

Personally I think the reasons are more complex and deep than either, (tells you all about me ) and involve a stable political environment, good labour relations, good legal enforcement of contracts, high standard of living, well educated workforce and of course tax advantages.


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## Purple (8 Jan 2018)

cremeegg said:


> Personally I think the reasons are more complex and deep than either, (tells you all about me ) and involve a stable political environment, good labour relations, good legal enforcement of contracts, high standard of living, well educated workforce and of course tax advantages.


Take away the tax breaks and would any of the other factors attract them here? Given that we are a small island with a limited pool of labour (the hine-Ruhr metropolitan area has a population of 11 million people) do we stand out from the UK, Nordic countries, Germany etc on things like a stable political environment, good labour relations, good legal enforcement of contracts, high standard of living and a well educated workforce?


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## Leo (9 Jan 2018)

Purple said:


> The Multinationals might operate in many different sectors but they are all here for one reason; taxes.



Granted it might be a rare case, but the US company I work for and who employ more than 1,000 people here carry out no sales in Ireland or across Europe. So there is no corporate tax benefit at play here.


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## Purple (9 Jan 2018)

Leo said:


> Granted it might be a rare case, but the US company I work for and who employ more than 1,000 people here carry out no sales in Ireland or across Europe. So there is no corporate tax benefit at play here.


That is unusual. No transfer pricing or anything else in the background?


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## Leo (9 Jan 2018)

Purple said:


> That is unusual. No transfer pricing or anything else in the background?



Nope, fully a cost-base to the US parent company with hours worked billed to the US business. The company only operate in the US market. Any excess in recovery from the US is set aside and reinvested against buildings or infrastructure here, so the Irish legal entity records negligible or no profit.


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