November 11, 2015 / 1:19 PM / 4 years ago

Ireland says corporate tax surge sustainable, will treat prudently

DUBLIN (Reuters) - Ireland has been advised by the country’s tax collectors that this year’s surge in corporate tax receipts is sustainable and can be included in forecasts going forward, finance minister Michael Noonan said on Wednesday.

Ireland's Minister for Finance Michael Noonan displays a copy of the Budget on the steps of Government Buildings in Dublin. October 13, 2015. REUTERS/Cathal McNaughton

Ireland has this year collected almost 8 percent more tax than expected, driven by corporation tax receipts - helping the government cut its budget deficit but also prompting warnings that it should not spend gains that could quickly disappear.

Noonan said the Office of the Revenue Commissioners, which assesses and collects taxes, told his department that the increase in corporation tax was very broadly based, came from a number of sources and was seen across all sectors.

“They think it’s sustainable and they said there shouldn’t be any concern about putting it in for the tax base for next year,” Noonan told reporters.

“But we have been wrong in our forecasts (in the past), we’re not taking any risks with the forecasts... If more money comes in we’ll do what we’re doing this year and take it off the deficit.”

The government had expected to take in 4.6 billion euros in corporate tax in 2015 but already running 2 billion euros ahead of target, it could return to the peak of 6.7 billion that was collected in 2006, before Ireland’s financial crisis began.

Corporate taxes, much of which Ireland draws from its large cluster of multinational firms such as Apple, which announced 1,000 new jobs on Wednesday, have represented over 13 percent of the entire tax take this year compared to 11 percent in 2014.

The government used most of the tax windfall for this year on additional spending despite a warning from Ireland’s central bank governor against basing spending commitments on tax gains.

Other analysts have urged the government to heed the lessons of Ireland’s property crash when stamp duty - revenue from the sale of homes - was used to reduce rates of income tax during the boom, a policy that had to be reversed quickly and painfully during the bust.

“When you treat things that are transitory as if they are permanent, you can end up paying a very large price later on. The daddy of them all is stamp duty,” said Stephen Kinsella, an economics lecturer at the University of Limerick.

“The worry is that people treat this cash as if it’s forever and the problem is it may not be forever.”

Writing by Padraic Halpin; Editing by Andrew Heavens

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