IRELAND
If large multinationals relocate, not only will this cause a fall in corporate tax receipts, but leaves the overall fiscal balance vulnerable.
- In 2024, corporation tax receipts accounted for over a third of tax revenue receipts. The chart below shows that whilst other forms of tax receipts have been increasing, the bulk of the increase in overall tax revenue is driven by corporate taxes.
- Currently, the 10-year Irish-Bund spread remains tight around 28bps at the time of writing suggesting markets are overlooking the significance of potential fiscal weakness. If Trump threatens to implement tariffs on the EU due to some countries' corporate tax rates in the EU being too low and supposedly negatively affecting the US, the EU may pressure Ireland to raise taxes. This will make Ireland a less attractive country to domicile in, increasing uncertainty on how Ireland will manage to sustain its budget surplus if corporate tax receipts fall if multinationals relocate, likely widening the spread beyond levels seen this year.
- Whilst this is an increasing worry, Ireland has had an exchequer surplus in the last three years with an exchequer surplus of E12.8bln at the end of 2024 and a healthy cash balance of E34bln at the end of 2024, though looking ahead this is expected to fall to E25bln by end-2025 according to the Irish Treasury.
- Furthermore, excluding the CJEU ruling receipts from the 2024 balance would leave the exchequer surplus at a slim E1.8bln.
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