Soaring corporate tax receipts are flattering the public finances in a way "not dissimilar" to the Celtic Tiger property bubble, warn Government officials.

A Department of Finance report forecasts that €20billion could be collected through corporation tax by the end of this year.

The record-breaking figure is €13billion more than 2015 and €5billion more than last year.

The "De-risking the Public Finance - Assessing Corporation Tax Receipts" report recommends a replenishing of the rainy-day fund to offset the risk caused by reliance on the 'volatile' tax.

It states that given the "considerable uncertainty" around changes in corporation tax there could be a €6billion hole left in the public finances.

In Association with

"The public finances remain vulnerable - Ireland's public debt is amongst the highest in the developed world and the population is set to age rapidly in the years ahead, with major implications for the public finances," it says.

One in four euro collected in tax now comes from corporation tax, with half of this coming from just 10 "superstar firms".

It states that the jump could be temporary and warned that "firm-specific volatility can play an outsized role in overall economic activity".

"This volatility presents challenges in assessing the overall sustainability of Ireland's corporation tax receipts, given that changes in the operations of a small number of foreign-owned multinational firms can have a significant bearing on the quantum of corporation tax receipts," it says.

The report draws similarities with the public finances in the lead-up to the 2008 crash, which was fuelled by an over-inflated property market.

"There is strong evidence to suggest that the headline fiscal position flatters the underlying situation, a situation not dissimilar to that in 2003-2008 when transitory property-related taxes artificially boosted government revenue," it says.

It adds that "blind spots" in the public finances need to be carefully monitored as they could "potentially make a challenging situation even more difficult".

"In this regard, the warning signs regarding taxation receipts from the corporate sector cannot be ignored," it added.

Minister for Finance Paschal Donohoe said that it was "very possible" corporation tax could be double what it was pre-pandemic. "This level of increase and a shift of this magnitude has to inform our thinking regarding the future and regarding what could happen if those corporate tax receipts were to fall or to not increase at the rate they have increased in recent years," he said.

Mr Donohoe said that replenishing the rainy-day fund would be a matter for the entire Government and that this was part of ongoing Budget discussions.

"In my view, there is a strong argument to treat a portion of corporation tax receipts as volatile in nature.

"In doing so, we can address a key risk to the public finances and thereby help ensure our country's fiscal sustainability," he said.