2023-08-12 11:10:32
A tax haven for multinationals in Europe, Ireland has garnered record corporate tax revenues. To the point of no longer knowing what to do with this financial windfall.
What to do with a budget surplus of 10 billion euros? In many countries like France, in continuous deficit since 1974, the question could surprise. In Ireland, however, it is the one that has been driving the debate for several months.
According to data from Financial Times relayed by Courrier InternationalIreland’s budget surplus reached €8 billion in 2022 and is expected to be €10 billion this year.
This windfall, Ireland owes in large part to the very good post-Covid results of the technological and pharmaceutical multinationals established on its territory. It must be said that the Emerald Isle, with a particularly low corporate tax rate (12.5%, compared to 25% in France) remains particularly attractive for large groups. Corporate tax, two-thirds of whose revenue comes from ten companies, is also the second source of state revenue, behind income tax.
“As a country, we are in an unusual situation: we are living within our means,” said Irish economist Seamus Coffey in the Irish Examiner. So much so that politicians are wondering about the best way to allocate the budget surplus.
Build housing or invest in a sovereign wealth fund?
Faced with the housing crisis affecting the country and in particular the capital Dublin, the opposition suggests using this tax kitty to build housing. Not so simple, replies to the BBC Professor Alan Barrett of the Institute of Economic and Social Research, Dublin. The latter recalls that Ireland is at full employment and that it would therefore be difficult to find the labor necessary to implement a major housing or infrastructure construction plan.
For its part, the Armed Forces Committee is calling for an increase in the Irish army’s budget, which is currently the lowest in the European Union (0.3% of GDP in 2022). But the government is pleading for another solution, debated a few weeks ago in the Irish Parliament: reinvest exceptional tax revenues in a sovereign fund which will make it possible to pay pensions and health expenses in a context of demographic aging.
However, nothing is settled at this stage. The debate is set to continue, and likely for several more years as Ireland’s budget surplus could reach up to €65 billion by 2027.
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