Minister Donohoe publishes Annual Taxation Report
The Minister for Finance, Paschal Donohoe TD, has today (Thursday) published the Annual Taxation Report looking back at the developments in taxation receipts throughout the pandemic and analysing the structural features of the tax base.
The Annual Taxation Report 2022 is the Department’s fifth such report. These reports aim to expand on the short-term monitoring and analysis of taxation in the monthly Fiscal Monitor by providing a longer-term, strategic perspective on revenue trends. The key motivation for the reports is to avoid a repeat of the financial crisis era, where structural vulnerabilities in the tax base had built up over time, with severe consequences.
The latest report provides an overview of the rebound in tax revenues over 2021 as the pandemic evolved. Analysis shows that receipts were particularly driven by strong wage growth and by increased profits in the pharmaceutical, med-tech and ICT sectors. However, there are vulnerabilities that need to be monitored. The multinational sector accounts for a large share of our corporation tax and also our income tax. An external shock to this sector could have serious repercussions for the public finances.
The report also provides a retrospective examination of the extraordinary level of fiscal support Government provided during the pandemic. At €48 billion, or over one-fifth of GNI*, the scale of this intervention was unprecedented. The robust economic recovery and the absence of any significant ‘scarring’ suggests that this approach was the appropriate course of action.
Commenting on the publication, Minister Donohoe said:
“The Annual Taxation Report is an important contribution to discussions on how taxation policy can respond to economic challenges, and will complement the work of the Commission on Taxation and Welfare. The analysis shows that, while the headline figures are very positive, our tax system contains significant structural vulnerabilities, especially in respect of income tax and corporation tax. It is essential that we rebuild our fiscal buffers to ensure that we are able to weather future shocks that could impact on these receipts.
I also welcome the retrospective analysis on the support made available by Government over the past two years of the pandemic. This support was extraordinary, but the strength of the economic recovery we have seen take hold demonstrates that it was right and appropriate to act on such a scale.”