Fiscal council to warn of reliance on multinational tax
· RTE.ieThe State's fiscal watchdog is warning of "significant risks" arising from new EU rules on government spending and the Exchequer's growing reliance on multinational tax revenues.
The Fiscal Advisory Council will caution that the State will face "little external scrutiny under the new rules" which "don't account for Ireland's increasing reliance on corporation tax".
A meeting of the Committee on Budgetary Oversight will hear that the rules "are unlikely to safeguard Ireland's public finances".
"Like a motorway with unenforced speed limits, Ireland will for the most part be left to its own devices," Dr Seamus Coffey, Chairman of the council, will say.
The new rules focus "heavily" on Gross Domestic Product (GDP) and paint an "overly benign" picture of Ireland's finances, his opening statement reads.
He urges that Gross National Income (GNI) be used instead, as it "has a closer link to things that matter".
GDP is based on the value of goods and services, whereas GNI is linked to a country's income.
Crucially, Dr Coffey will say, GNI "includes the more reliable tax revenues Ireland raises, basically everything outside of corporation tax, and things like jobs created in the economy".
Last week, the Government submitted a five-year economic plan required under the new rules.
The Fiscal Advisory Council has previously issued warnings over the Exchequer's reliance on tax paid by multinationals.
It estimates that "just three multinationals made up 43% of corporation tax receipts in 2022," Dr Coffey will tell the committee.
These "could reverse if there is a sudden shift in company fortunes, restructurings, or a change in international or US tax policies".
If future governments break the new EU rules, Dr Coffey will warn that: "It's unclear what action, if any, the European Commission might take".
One solution would be a commitment to abide by "the Net Tax and Spending Rule introduced in 2021", or to make it law.
"But the Government would have to stick to it."