Despite the threat from US tariffs, the Irish Fiscal Advisory Council (Ifac) believes corporate tax receipts will increase in the short term, shoring up the Government’s budgetary position.
However, a more protracted trade war between Europe and the US would pose a risk to the Government’s tax base, it said.
As EU and US negotiators try to broker a deal that would avoid US president Donald Trump’s 50 per cent tariffs, due to come into force on July 9th, the Government’s budgetary watchdog noted that the biggest payers of corporate tax here were in the tech and pharmaceutical sectors.
“Neither of these are affected by tariffs under current policies,” Ifac’s acting chief economist Niall Conroy told The Irish Times, while noting that firms in these sectors were still “highly profitable”.
He also highlighted the “enormous increase in pharmaceutical exports” seen earlier this year, a reflection of firms stockpiling produce in the US ahead of tariffs, which is also likely to boost receipts in the short term.
“This could be offset by lower exports later in the year, but it still points to strong corporation tax this year,” Mr Conroy said.
Corporate tax receipts rose to a record €39 billion last year, although this included approximately €11 billion from the Apple tax case.
Mr Conroy warned that “things are more uncertain in the medium term”.
“For example, if tariffs were to directly impact the tech and pharmaceutical sector, corporation tax receipts could suffer,” he said.
While pharma has – so far – escaped tariffs, the White House is waiting on a report that could yet see specific tariffs applied to the sector that would have a direct impact on Ireland, as pharmaceuticals constitute a major part of State’s exports to the US.
Separately, Minister for Public Expenditure Jack Chambers has admitted that infrastructure delivery is in a “state of paralysis”.
“It’s not being accelerated, it’s not being advanced,” Mr Chambers told the Global Economic Summit in Kerry. “That’s affecting investment decisions and it’s affecting our wider economic growth.”
He said “the acid test” of the new Government would be its ability to deliver big infrastructural projects and that a special infrastructural taskforce within his department had been set up to “forensically examine” blockages in the system.
Mr Chambers said the Government would prioritise the delivery of housing, transport, water and energy infrastructure and that an additional €20 billion would be added to capital investment between 2026 and 2030.
A review of the Government’s €165 billion National Development Plan will be delivered in July, he confirmed.
Mick Mulvaney, former White House chief of staff during Mr Trump’s first term of office, told the summit on Monday that there were “no free traders left in the White House”.
“There’s going to be the protectionist wing, which is the Peter Navarro (Trump’s trade adviser) wing, and the sort of nuanced wing which is – let’s use tariffs as leverage to get better trade deals,” he said.
Mr Mulvaney also said fears of third Trump term were unfounded.
“I think he put that to bed on a Sunday talk show a couple weeks back. Of all the things you might want to worry about, you can probably take that one off your list,” the former Republican congressman said.
