If we thought that the years 2020 and 2021 were challenging for the economy due to the Covid-19 pandemic, the year 2022 has demonstrated even more challenges, volatility and unpredictability, with a mixture of war, the return of price inflation, and a plethora of energy crises.
This combination of economic headwinds has raised considerable concerns as to how the government needs to manage the public purse.
I needs to both support those impacted most by the increase in price inflation, while also not over-reaching public spending commitments and increasing the future tax burden.
Challenging times indeed.
Challenges
In this context there has been a lot of discussion about the key role which corporation tax receipts from a relatively small number of multinational companies play in creating the ‘cream’ at the top of the Irish economy’s tax receipts.
As the table below shows, corporation tax receipts have almost doubled since 2016 and the forecast for 2022 is for a final annual total of almost €17 billion compared to €7.3 billion in 2016.
While much has been made of the corporation tax increase, it is very clear that the overall tax take of almost €70 billion is dependent on a lot more than just the multinational sector activity.
Indeed a recent report from Enterprise Ireland highlighted the contribution of indigenous businesses, and especially food and drink companies.
- 2021 was highest ever level of growth for Enterprise Ireland – backed companies in export value;
- Exports grew across all territories, with exports to the Eurozone up by 10%;
- Enterprise Ireland clients last year contributed €31 billion to the domestic economy;
- Food exports increased by 6%, accounting for over €12.91 billion or almost 50% of total exports.
So while corporation tax provides the ‘cream’ in terms of the national tax take and the multinationals play a key role in delivering the recent increases, the Irish economy needs all of its moving parts operating at optimum level if we are to successfully manage the multi-aspect challenges of inflation, war and energy price surges.
Agri-food contribution
For those of us involved in the agri-sector, it is perhaps no longer so surprising, but still disappointing, that the national discussion about the Irish economy largely ignores the agri-food sector and indigenous industry.
Despite the reality, when it comes to framing the budget required to address current economic challenges, that the real size of the Irish economy is about half our official gross domestic product (GDP) figure of €320 billion, much of the ‘business economy’ narrative continues to focus on businesses whose future direction will be decided in boardrooms in the US and elsewhere.
This is while also ignoring the performance and impact of domestic companies whose performance actually has a bigger impact and contribution to the total of €70 billion collected in taxes across the Irish economy
Let’s be clear: All of the parts of the Irish economy, indigenous, agri-food and multinational are important, and very necessary to maintaining economic activity at a level needed to manage economic headwinds.
And yet, adding to the challenge of highlighting the continued relevance of the agri-food sector to the modern Irish economy, has been the view of the environmental lobby that suppression of the Irish agricultural sector is the key to delivering on Ireland’s climate action commitments.
One has the sense that this obsession with reduced agricultural output is not just indifferent to the economic impact of this suppression of agriculture, but that in this view, even though we will be collectively poorer, we will be purer in their eyes.
This elitist nonsense is being exposed as we speak in terms of the various discussions and presentations on national and sectoral carbon budgets.
The agri-food sector supports 260,000 jobs; €15 billion in exports; and €16 billion spend in the Irish economy.
In this context, it is to be hoped that in addition to a properly informed assessment of the unique impact of the agri-food sector, the key issues of carbon leakage, the protection of food production, along with the government’s commitment in the Climate Action Bill to cater for ‘the special economic and social role of agriculture, with regard to the distinct characteristics of biogenic methane”, are also recognised.