This has always confused me. In the modern era why shouldn't stuff like IP licensing transfers and airplane leasing be considered legitimate economic activity?
As noted by jpd - This is a case of "easy come, easy go." The OECD went through a round of corporate tax rule changes that we cooperated in, and ended up benefitting greatly from. Those reforms are not finished, and the next pillar of them is to come. And I could see a situation where third parties again look at the likes of Ireland rolling in surpluses and wanting to go again on the rules. The next thing of note is that policymakers abroad could lean on their domestic champions, or provide incentives, to bring the IP home.
This is not at all sticky, even though it has been happening successfully for a few years. It is highly analogous to the credit fueled housing boom in the sense that it would appear to be a dysfunction that could correct itself at any moment, this time based on the actions of international players who have agency and a desire to see more taxes paid in their jurisdiction.
The second risk is that even if the tax system remains the same, this significantly amplifies our exposure as a small open economy to economic shocks. It's a risk we've always had, but the amplification of that risk in recent years I think is lost on a lot of people.
Back in 2014, the top 10 corporate taxpayers contributed around 37% of corporate tax receipts, which amounted to about €4-5 billion. This represented roughly 6% of Ireland's total tax receipts at the time. Fast forward to 2023, and we see a dramatic increase—those same top 10 now account for 53% of corporate tax revenues, with their contributions nearing 13-14% of all tax receipts.
In 2023 the top 10 accounted for 53% of the corp tax take, which came in at €23.6bn in total. The estimates linked at the top of this thread are estimating corp tax (ex-Apple CJEU) €29.5bn this year out of an estimated total €107bn (27.5%) and €29.5bn next year out of an estimated total €109bn (27%) of current receipts. So if we assume 50% from the top 10, that's €14.75bn each year from 10 companies, which represents ~13.5% of all tax receipts, and that's probably a lowball. Revenue only knows what the value of the domestic employment adds up to, but we know MNCs pay well and that top earners make up most of the income tax take.
This is orders of magnitude more risk to the "small open global economy" we know of the past, and is one reason I point back to the housing boom - firstly we didn't notice the underlying scale of the problem, then we hand waved it away, then we looked shocked when the risk came good.
The fact of the matter is that we are running a deficit now, today, of -€6.3bn and -€5.7bn next year when you strip out the estimates of this one off effect and the money we are (rightly) sending to future investment funds. That's -2% of GNI* this year and -1.7% of GNI* next year. This is at a time when the same forecasts from the DoF have GNI* growing at 4.9% this year and 2.7% over the next few years, with unemployment basically sitting at "full employment" levels. There is absolutely no justification to (a) be running an underlying deficit at this time or (b) be pouring ever larger amounts of money into the system, much of which is (c) actually or likely to be taken as permanent by the population.
