As published on morningstar.com, Wednesday 10 May, 2023.
Ireland on Wednesday said it was looking to set up a sovereign wealth fund, buoyed by a surge in corporate tax receipts that has propelled its economy.
Finance Minister Michael McGrath announced a plan to put to use what the government called windfall corporate tax receipts, which it estimated will be about EUR12 billion ($13 billion) this year.
Corporate tax revenue was the source of more than 1 euro for every four collected last year in Ireland. In the U.S., corporate taxes have accounted for 7% of receipts so far this fiscal year, according to the Congressional Budget Office.
Corporate tax revenues have skyrocketed as foreign companies have flocked to Ireland to take advantage of its low rate of 12.5%. The Irish government says the 10 largest companies account for half of the receipts.
This corporate tax bounty could be used to help pay for the pressures on government finances from an aging population -- by 2030, age-related spending will be up to EUR8 billion higher per year than at the beginning of the decade, it says. It also says costs related to climate and digital transitions are likely to involve significant outlays.
Ireland also noted the differing examples of Norway and the U.K., both of which saw a surge in revenue from oil producers out of the North Sea that the countries border.
The U.K. in effect decided to reduce taxation by not earmarking any of the North Sea-driven receipts. "Norway undertook a more fiscally prudent approach to the revenue generated by its windfall receipts, in effect saving all of the government's net oil revenue for future generations," the report said.