The Parliamentary Budget Office (PBO) published its preliminary review of Budget 2022. Initial commentary calls for additional information on the potential costs of the extension of the Help to Buy Scheme and the reduced rate of VAT for the tourism and hospitality sector. The PBO has concerns relating to the estimated impact of OECD international tax reform, calling the €2 billion estimate “a very uncertain estimate”.
In considering corporate tax projections, the PBO notes that a key issue for consideration is the OECD BEPS reforms that Ireland recently agreed to. While it is noted that Pillar Two of the agreement, providing for a global minimum tax rate of 15 percent for companies with revenue over €750 million, could lead to an increase in corporation tax revenue where the economic activity remained unchanged, it is emphasised that the combined impact of Pillar One and Pillar Two could make Ireland a less attractive location for multinational companies, which could significantly reduce annual corporation tax receipts.
Budget 2022 states “revenue foregone – at €2 billion relative to baseline by 2025; the revenue impact is phased in from 2023”. The PBO details that “the projection of a reduction of annual corporation tax receipts by €2 billion by 2025, as a result of BEPS, is a very uncertain estimate. The challenge in forecasting arises from the multiple dynamic impacts on a diverse range of sectors across the global economy.”
The need for Ireland’s green budgeting practices to be effective in order to achieve Ireland’s climate and environmental goals is also considered in the Preliminary PBO Review of Budget 2022.
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