Ireland's finance minister, Michael McGrath, has forecast a budget surplus of €10bn (£8.85bn) this year, equivalent to 3.5% of national income. However, he has warned that a significant portion of the corporation tax revenue underpinning the surplus is a "windfall" from multinational companies that may not be sustainable. The annual surplus is projected to exceed €20bn (£17.7bn) by 2026.
The windfall stems from a surge in corporation tax receipts, which reached €22.6bn (£20bn) last year, up 182% from €8bn (£7.08bn) five years earlier. McGrath has designated about €12bn (£10.62bn) of the total as temporary, derived from "a particular set of circumstances that won't last forever."
The increase follows a global push for tax reform, including comments by US Treasury Secretary Janet Yellen in April 2021 about ending the "global race to the bottom" on corporate tax. Ireland has long attracted tax-sensitive foreign investment with its 12.5% headline rate. In the mid-2010s, major companies such as Apple began relocating intellectual property assets to Ireland, responding to pressure to declare profits where they have substantial operations. Apple's 2015 IP shift is believed to have caused a wild swing in Ireland's GDP. Finance journalist Thomas Hubert estimated that Apple paid Irish corporation tax in the high €3bn to €4bn bracket in 2022 alone.
Economists urge caution over how to use the revenue. Prof Alan Barrett of the Economic and Social Research Institute said that because the extra revenue cannot be fully explained, it could disappear quickly. "The discussion is all around the notion that we have to be really careful not to start making long-term day-to-day spending commitments based on this revenue," he said. He also highlighted the risk of repeating the mistakes of the Celtic Tiger era, when spending depended on property-related tax revenues that collapsed.
One potential use for the money is a large programme of social housing and infrastructure. Ireland is in the grip of a housing crisis, which the governing coalition has struggled to address and has been punished for in the polls.
