A GENERAL GOVERNMENT surplus of €8.6 billion has been projected for this year.

However, Finance Minister Michael McGrath has cautioned that there would be an underlying deficit without “windfall” corporation tax receipts.

The figures are part of the Stability Programme Update, which marks a milestone in preparing for the 2025 Budget.

McGrath explained that the surplus figure is based on the assumption of tax revenue amounting to more than €92 billion, a growth rate of 4.6%.

However, he said the €8.6 billion surplus is “heavily dependent on volatile ‘windfall’ corporate tax receipts which have grown from €4 billion to €24 billion in the space of a decade”.

McGrath noted that when the windfall element of these corporate tax receipts – which he estimates at around €11 billion – are excluded, there is an underlying deficit in public finances.

The Finance Minister warned that corporate tax receipts “cannot be relied upon” and pointed to a “marked slowdown” and “volatility” in corporation tax over the course of last year.

Last October, corporation tax receipt fell by 45%, a loss of over €1 billion when compared to October 2022.

It was the third consecutive month receipts for the tax declined, when compared to the previous year.

“We can say with reasonable confidence at this point that the era of corporation tax over-performance is coming to an end,” said McGrath.

As a result, he said the Government is establishing two new long-term investment vehicles – the ‘Future Ireland Fund’ and the ‘Infrastructure, Climate and Nature Fund’.

McGrath said the “objective is to invest windfall receipts to help prepare for future known fiscal challenges” and added that the legislation establishing these funds is currently progressing through the Oireachtas.

The Infrastructure, Climate and Nature Fund will seek to assist with climate change objectives and nature, water quality and biodiversity issues, while the Future Ireland Fund deals with future recognised expenditure pressures including an ageing population and climate change.

Elsewhere, Modified Domestic Demand (MDD) is projected to grow by 1.9% this year, and by 2.3% in 2025.

Ireland uses the metric of ‘Modified Domestic Demand’ (MDD) in an effort to exclude large multinational activity that can inflate economic activity.