As published on: uk.news.yahoo.com, Wednesday 5 July, 2023.
Ireland will unveil a tax and spending package of €6.4 billion ($7 billion) in its forthcoming budget as strong corporate tax receipts continue to bolster public finances.
Finance Minister Michael McGrath said the government would boost government spending by €5.2 billion and introduce a new package of just over €1.1 billion in tax cuts in October’s budget.
Further spending on one-time measures aimed at easing the rising cost of living may be announced later, McGrath told reporters in Dublin on Tuesday.
The ministry will set aside a portion of Ireland’s recent windfall corporation tax receipts to pay for a €2.25 billion increase in infrastructure spending. Much of the remainder will be invested in a new sovereign wealth fund, the precise details of which are still being worked out by officials.
“The strategy today represents, in my view, a credible, sensible and sustainable pathway for our public finances,” McGrath said. “It takes into account the economic realities at present, while still ensuring we retain the flexibility and the fiscal resources necessary to respond as needed to the challenges we face in the future.”
The estimated 6.1% annual increase in core public spending outlined on Tuesday would bring total expenditure next year to €91.2 billion. Ireland will still be on track to record a €11.7 billion government surplus this year as corporate tax receipts continue to surge, according to the ministry.
Corporate tax revenue has doubled since before the pandemic, which economists attribute to changes to global tax rules, increased profits among technology and pharma companies headquartered in Ireland, and the expiration of capital allowances which temporarily cut firms’ tax bills.
McGrath announced the new sovereign wealth fund earlier this year. The ministry has said the fund will receive at least €34 billion by 2030, with lawmakers deciding over the coming weeks how much tosave each year. A minimum annual contribution of €4 billion and a maximum of €12 billion will be made.
Corporate tax receipts reached €10.6 billion in the first half of the year, a 20% increase from a year earlier.