Several large multinationals operating in Ireland would accelerate their revenues in the years to come in order to pay their corporate taxes “on today’s terms”, economist Colm McCarthy told the Dublin Economics Workshop (Dew) on Wednesday.
Mr McCarthy said the companies, which would include banks at the Irish Financial Services Center (IFSC) in Dublin, have the ability to accelerate revenues for years to come by forcing customers and customers to prepay in advance.
This would allow them to avoid possible changes to the global tax system stemming from the Organization for Economic Co-operation and Development (OECD) agreement which proposes a corporate tax rate for large companies of at least 15 %.
Ireland is expected to lose at least 20 percent or € 2 billion – perhaps more – of its corporate tax revenues as a result of the reforms, posing a threat to public finances.
Frontloading of corporate taxes today could further exacerbate the decline in upstream revenues.
“I wonder if the authorities are fully aware of this as it means that there could be low corporate tax revenue in the years to come even if there was no change in the global corporate tax system, ”said McCarthy.
“If this really happens, it won’t signal to tax commissioners in the form of prepayments by the companies paying the tax. This will take the form of prepayments by their customers, ”he said.
“Poor value for money for taxpayers”
Mr McCarthy was contributing to a debate on the future of public services in the aftermath of Covid-19 at the workshop’s annual conference.
The repeated financial crises in Ireland were almost always followed by tax increases and cuts to the capital spending program, he said, noting that the capital budget was halved after the crisis bank in 2008, which ultimately led to underinvestment in water, housing and transportation.
“Far from acting to stabilize economic activity, the investment program here in Ireland has an independent source of macroeconomic instability,” he said. The stop-start model of capital spending has also delivered low value to taxpayers, he said.
Mr. McCarthy highlighted what he described as three “extraordinary debacles” related to capital spending over the past two years: the National Broadband Plan; the National Children’s Hospital; and national maternity.
These projects were over budget, he said, as the two hospitals were located “in traffic black holes in the inner suburbs of Dublin.”
He criticized Transport Minister Eamon Ryan’s approval of a high-speed rail project in Ireland before proper cost-benefit analysis.
The proposed terminus towns / cities for the high-speed link of Cork and Donegal would be the smallest in the world, Mr McCarthy said.
Irish Fiscal Advisory Council (Ifac) chairman Sebastian Barnes also addressed the conference, which warned that pressure on public finances, even to cover the stagnant cost of existing services and benefits, would increase over the next decade as the population ages and as a consequence of the need to invest in climate change infrastructure.