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IRELAND: Risks From Potential US Tariffs - Corporate Tax Vulnerability (3/3)

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  • To address this fiscal concern, Ireland has set up the Future Ireland Fund (FIF), a long-term savings fund, which is intended to contribute to exchequer expenditures in the 2040s onwards. Currently over E8bln sits in the FIF (E4bln from the National Reserve Fund was transferred and E4bln contributed for 2024), with 0.8% of GDP to be added every year. The government hopes as much as E100bln could reside in the FIF.
  • Whilst the establishment of this fund is promising, it was created relatively late. The Economic and Fiscal Outlook 2025 publication from the Department of Finance outlines expectations of the Exchequer Balance to fall into deficit from 2026 at -E0.8bln, and remain in deficit for the foreseeable future (2030 where the estimates end).
  • The forecast deficit is not only due to corporation tax receipts anticipated to fall but due to higher expenditure. The Irish government plans to allocate E14.9bln to "voted capital expenditure" (i.e. capital expenditure that needs parliamentary sign-off) to help narrow the infrastructure gap in 2025. This is the highest level ever in cash terms, but similar to 2024 levels when adjusted for inflation. Whilst this should benefit the Irish economy in the long run, in the short term it leaves the fiscal balance more vulnerable.
  • Had the Fund been set up earlier,it likely would be better able to cushion the potential fall in receipts and higher expenditure better to increase confidence in the government that the exchequer balance will continue to be in surplus in the years to come.

 

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  • To address this fiscal concern, Ireland has set up the Future Ireland Fund (FIF), a long-term savings fund, which is intended to contribute to exchequer expenditures in the 2040s onwards. Currently over E8bln sits in the FIF (E4bln from the National Reserve Fund was transferred and E4bln contributed for 2024), with 0.8% of GDP to be added every year. The government hopes as much as E100bln could reside in the FIF.
  • Whilst the establishment of this fund is promising, it was created relatively late. The Economic and Fiscal Outlook 2025 publication from the Department of Finance outlines expectations of the Exchequer Balance to fall into deficit from 2026 at -E0.8bln, and remain in deficit for the foreseeable future (2030 where the estimates end).
  • The forecast deficit is not only due to corporation tax receipts anticipated to fall but due to higher expenditure. The Irish government plans to allocate E14.9bln to "voted capital expenditure" (i.e. capital expenditure that needs parliamentary sign-off) to help narrow the infrastructure gap in 2025. This is the highest level ever in cash terms, but similar to 2024 levels when adjusted for inflation. Whilst this should benefit the Irish economy in the long run, in the short term it leaves the fiscal balance more vulnerable.
  • Had the Fund been set up earlier,it likely would be better able to cushion the potential fall in receipts and higher expenditure better to increase confidence in the government that the exchequer balance will continue to be in surplus in the years to come.