The latest exchequer returns will do little to urge caution on those negotiating the next programme for government. Boosted by the receipt of €11 billion of the €14 billion once-off payment due from Apple, the exchequer was in surplus to the tune of almost €13 billion last year.
The question for those negotiating the next programme for government is how to treat this extraordinary buoyancy and the repeated warnings from the Department of Finance and the Irish Fiscal Advisory Council that much of the corporate tax receipts are windfall – in other words, they are a result of multinational tax planning rather than of activity undertaken in Ireland.
The election promises suggested that the two big parties in the next administration – Fianna Fáil and Fine Gael – plan to double down on their bets that taxes will continue to flow in and spend more of the windfall. This would be unwise, especially as Donald Trump enters the White House.
What Trump will do remains uncertain – and is unlikely to have an immediate impact on 2025 tax revenues. But it could affect investment and tax in the latter part of the next government’s term and it would be wise to have significant financial leeway in place to deal with this.
[ Ireland’s tax take hits record €108bn amid Apple boostOpens in new window ]
Stacked against this, however, is the political reality of huge pressure on the new coalition to spend to address the housing and homelessness crisis, improve the health system and boost public services. The past few years suggest that Irish politicians can resist anything but the temptation to spend money.
The one exception has been the decision by the outgoing Coalition to put cash aside in two funds for the future and back this up with legislation. There is a strong argument for ensuring these funds are filled up early in the next government’s term and that the budget is kept in surplus to allow room for manoeuvre in what could be a few trickier years from 2026 on.
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