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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 12h

7/7 You can find our blog on our website here: fiscalcouncil.ie/beyond-the-b... You can also subscribe to our Substack page to get notifications of our latest blogs substack.com/@irishfiscal...

Beyond the Budget – Irish Fiscal Advisory Council

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 12h

6/7 This matters when assessing how exposed Ireland’s corporation tax revenues are to tariffs and other factors that influence the profitability of these sectors.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 12h

5/7 This alternative method of classifying subsidiaries paints a very different picture. We estimate that the tech and manufacturing sectors accounted for, on average, 87% of the corporation tax paid by large US-owned multinationals in Ireland between 2016 and 2023.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 12h

4/7 The US publishes data on the corporation tax paid by large US-owned multinationals in Ireland. Importantly, this US data groups each firm based on the main activity of the group parent. US-owned firms make up about three-quarters of Irish corporation tax revenues.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 12h

3/7 This is because some firms, often classed as financial and insurance in official data, are part of larger groups which are mainly focused on tech or manufacturing activity. For example, a pharma group’s treasury arm is classed as financial and insurance, not manufacturing.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 12h

2/7 Since 2012, official data shows that about 70% of Ireland’s corporation tax revenues have come from just three sectors: manufacturing, tech, and financial and insurance. However, this likely understates the amount of corporation tax paid by the manufacturing and tech sectors.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 12h

1/7 We have a new blog post in our Beyond the Budget series, titled “Why corporation tax could be even more concentrated than you think”. It looks at how these tax revenues could be even more concentrated among tech and manufacturing groups than official data suggests.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

16/16 Again, this assessment is preliminary. The Council will give its full assessment of Budget 2026 in its Fiscal Assessment Report. By then, typically more information will be available, which will allow a more complete analysis.

Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

15/16 Even after accounting for inflation, spending net of tax changes is growing at a rapid pace, over 9% in 2025 5.3% in 2026. This is much faster than the sustainable growth rate of the Irish economy.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

14/16 Our first read is that this means that nominal spending net of tax measures is set to grow by more than 11% in 2025 and 7.3% for 2026.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

13/16 Budget 2026 includes more realistic forecasts for corporation tax receipts. The Department now expects a €3bn positive impact from OECD BEPS reforms in 2026—an improvement on earlier estimates of a €2bn negative impact. This is consistent with Fiscal Council projections.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

12/16 While the tax package announced today appears to be relatively modest, it will have a bigger impact in future years. The full-year costs will be much higher than the cost in 2026 (€2.3 billion vs €1.3 billion). This is due to measures introduced midway through 2026.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

11/16 These increases above what was set out on Budget Day are due to a combination of repeated expenditure overruns and within-year policy changes. Spending in 2025 could be even higher than currently forecast, if spending trends seen so far this year continue.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

10/16 Budget 2024 set out a base of €96.6 billion of Gross Voted Expenditure for 2024. As things stand, Gross Voted spending in 2025 is set to be €109 billion. This is an increase in spending in 2025 of €12.5 billion (12.9%) relative to what was originally set out for 2024.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

9/16 While much of the focus today is on the budget day package, there is no guarantee that spending will evolve as outlined today. Spending increases this year are likely to be more than double what was announced in the budget last October.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

8/16 The package announced by the Government this afternoon amounts to at least €7.4 billion (adjusted for tax measures). This is larger than the package of permanent measures introduced in recent budgets.

chart showing the budget package for 2026

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

7/16 The Budget outlined €6.1 billion for current spending increases, €2 billion for capital spending increases, and €1.3 billion of tax changes. Unlike recent budgets, all of the measures announced are permanent, and will recur every year.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

6/16 While the Government is running a surplus, this is driven by the extraordinary amount of corporation tax that is being collected. Without these revenues, the Government’s own figures show a deficit of almost €14 billion could emerge next year, a deterioration of €6.2 billion.

chart showing the government is running large and increasing underlying budget deficits

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

5/16 Standard economic advice would suggest that budgetary policy should provide less support when the economy is strong (like right now) and more when it is weak (were the economy to suffer a downturn).

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

4/16 The Budget comes at a time when the Irish economy is performing well. Employment is at a record high and wage growth is exceeding inflation.

chart showing employment has increased rapidly in recent years

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

3/16 The Government has yet to submit an updated Medium-Term Plan to the European Commission. This five-year plan, which sets out an expenditure path, was due to be submitted over the summer but this is yet to happen. This suggests the process is not being taken seriously.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

2/16 Budgetary forecasts in Budget 2026 only cover 2026, unlike recent budgets. Good planning and budgeting requires forecasts that go more than 15 months ahead. The Council has consistently stressed the need for budgetary forecasts that go at least five years ahead.

chart showing the forecast horizon for recent budgets

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 8d

1/16 This “Flash Release” gives the Council’s first read on Budget 2026. It explores some of the key areas that the Council will assess in its next Fiscal Assessment Report, due out in November.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 11d

4/4 The White Paper itself could vastly improve transparency by focusing on general government, rather than the narrower Exchequer. It could also improve transparency by showing gross rather than net spending to allow forecast comparisons.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 11d

3/4 The White Paper suggests large and growing underlying deficits in 2025 and 2026. Excluding excess corporation tax, the White Paper estimates a deficit of almost €10 billion next year. This is before any new budgetary measures are introduced.

chart showing the underlying balance is deteriorating

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