Irish economy continues to benefit from tax windfall

The Irish government has seen a significant increase in corporation tax revenue, collecting €12bn (£10.16bn) in the first half of 2024, which is 15% more than the same period in 2023. Corporation tax is the tax paid by companies on their profits. Ireland has benefitted from reforms to global tax rules, resulting in major companies paying a large portion of their corporation tax in the country. As a result, the government is setting up a sovereign wealth fund with the windfall generated from corporation tax.

Last year, Ireland raised €24bn (£20.32bn) in corporation tax, which is three times more than the €8bn (£6.77bn) collected six years ago. The country’s Finance Minister, Jack Chambers, has announced that the budget will be brought forward by a week to 1 October. This move has fueled speculation that the governing coalition may be planning to call a general election before the end of the year. However, Mr. Chambers has stated that the government is committed to running its full term into next year.

The Irish economy has been performing well, with income taxes totaling almost €17bn (£14.4bn) over the first six months of 2024, which is a 7.5% increase compared to the previous year. VAT receipts, reflecting consumer spending, have also increased by 6.2%. Despite the strong economic performance, the Fiscal Advisory Council has cautioned the government against implementing a “giveaway” pre-election budget. The council warns that loose budgetary policies could lead to inflation rising and the economy overheating. It emphasizes that the government needs to make careful choices regarding tax cuts and spending increases to avoid price pressures and overheating the economy.