This is because some firms’ activities are being classed as ‘financial and insurance’ when in reality they are subsidiaries of larger groups, whose primary activity is manufacturing or ICT.
“This matters when assessing how exposed Ireland’s corporation tax revenues are to tariffs and US trade policy changes more generally,” the study says.
“So far, tariff hikes have focused only on goods, while ICT services have not been directly impacted – for now, at least.”
Data published by Revenue suggests 70pc of corporation tax comes from three broad sectors – manufacturing, ICT, and financial and insurance activities.
But IFAC economist Brian Cronin says this likely understates the amount being paid by manufacturing and ICT. This is because subsidiaries are being categorised by their principal activity, rather than what their parent company is doing.
The IFAC study gives the example of a pharmaceutical group’s treasury arm being classed as “financial and insurance”, even though the business of the company is manufacturing. A treasury arm acts as a financing company, moving money around the group or making investments on its behalf.
“Many ICT and pharma groups have subsidiaries involved in activities outside their main business, such as treasury operations. Some of these subsidiaries make sizable corporation tax payments,” the study says.
“For economic analysis, it is more appropriate to classify subsidiaries based on the principal activity of the group parent.”
On that basis, corporation tax receipts would be more highly concentrated in manufacturing and ICT, while financial and insurance activities would be downgraded, according to Mr Cronin’s analysis.
It points out that the breakdown given by the Internal Revenue Service (IRS) of the corporation tax paid by US firms in Ireland paints a different picture to the Revenue Commissioners’ data. The IRS indicates that manufacturing and ICT account for about 87pc of the corporation tax those companies paid between 2016 and 2023.
US multinationals are the biggest corporation taxpayers in Ireland, accounting for about three-quarters of revenues. They employ about 200,000 people directly, with thousands more downstream jobs relying on them.
Mainly due to their presence, the US is Ireland’s top export destination, accounting for over a quarter of all sales. The effect that US President Donald Trump’s tariff policies have had is again reflected in export figures for August, which fell for the third consecutive month.
Exports of goods totalled €16.2bn, down €1.2bn compared to August 2024. Exports of medical and pharmaceutical products, which represented just over 40pc of the total, decreased by €1.7bn year-on-year to €6.5bn.
Sales to the US were down over 38pc, or €2.6bn, driven by the decline in chemicals and related products.
Janette Maxwell, a partner in tax at Grant Thornton, said: “This decline is likely attributed to stockpiling earlier in the year ahead of potential tariffs; currency pressures, with a stronger euro reducing competitiveness; and rising production costs, particularly with respect to pharmaceuticals.
“Exports of medical and pharmaceutical products fell by €1.7bn in August, which is somewhat concerning given the sector’s outsized contribution to Ireland’s export profile.”
In an indication of a pivot to non-US markets, exports of goods to the EU increased by €1.5bn to €7.7bn in August, up by almost a quarter year-on-year.
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