Irish Budget 2018 makes makes only minor changes to corporate taxes

by Jim Stewart, Trinity College, Dublin

Irish budget 2018, released today, made very few changes directly affecting the Irish corporate tax regime.

One change was introduced relating to limitations on tax deductibility of intellectual property expenditures. This is forecast to increase revenue by Eur 150 million per annum. But this change has also been described as a ‘smoothing’ process rather than  reduction in reliefs, which indicates no revenue changes over a number of years.

The context of the budget is that the debt/GDP ratio is much improved because of growth in GDP, in particular measured GDP, which increased by 26% in 2015 and is forecast by the IMF to grow by around 3% per annum until 2022.

At the same time, the budget has moved into surplus in part due to surging corporate tax revenues which accounted for 15.7% of tax revenue in 2017, compared to 8% in 2010.

Although the budget statement emphasizes the importance of ‘certainty’ and sustainability of corporate tax revenues, proposals for changes to MNE tax from both the EU and US raise the issue of how certain the current corporate tax regime is and the stability of corporate revenue streams.

Recently the European Commission has stated, as a principle, that “all businesses operating in the EU should pay their taxes where profits and value are generated.”

The Commission has proposed the introduction of a common consolidated corporate tax base (CCCTB). The Commission has also been asked by Germany, France, Italy, and Spain to examine the compatibility with EU law of introducing an equalisation tax on the turnover of digital companies with the EU.

These initiatives are strongly opposed by Ireland.

“We do not support moving away from the consensus at OECD level which would result in double tax and significant uncertainty. Ireland will continue to insist that all tax measures at EU level require unanimity before they can be agreed, reflecting the fact that tax is a key Member State competence,” Ireland’s Minister for Finance said in a document published alongside the budget.

Given the absence of past support from the UK on tax and other matters, the Irish corporate tax regime and and a ‘tax driven’  industrial policy is bound to become more uncertain.

The Apple case illustrates these conflicts. There is no discussion of the Apple case, the possible implications of a Eur 13 billion payment; or the Commission decision to bring Ireland to the European Courts for non collection of tax in any documents associated with Budget 2018. by Julie Martin

However, a 4 October Department of Finance press release affirms that “Ireland has never accepted the Commission’s analysis in the Apple State Aid Decision” and that “it is extremely disappointing that the Commission has taken action at this time against Ireland.”

James Stewart

James Stewart

Adjunct Professor of Finance at Trinity College, Dublin

James Stewart is an Adjunct Professor of Finance at Trinity College, Dublin, where he researches corporate tax, foreign direct investment, shadow banking, and low tax centres. He can be reached at

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