FURTHER INCOME TAX cuts could be in jeopardy on the back of US trade tariffs due to be announced tomorrow. 

Issuing a stark warning today ahead of US President Donald Trump’s tariff announcement, Finance Minister Paschal Donohoe said Ireland is “very likely” to experience an “economic challenge in the next number of years”.

A lower level of economic growth with a risk to future job creation is on the cards, said the minister. 

On the “eve of such a significant day in the history of the world”, Donohoe said there is uncertainty to what scenario the country is facing.  

Asked about income tax and whether economic uncertainty will impact promises made in the programme for government, the finance minister pointed out that the government pledged to implement progressive changes in taxation, but only if the economy remains strong. 

“I said very, very clearly during the election campaign that if we get a hit by an economic shock, we would have to take actions to preserve our economy and to protect our tax base,” said the minister. 

He said the programme for government lays out clearly that in the event of a shock hitting the economy or there is a believe one is about to hit, the government would “have to take measures that mean that we don’t make our difficulties even worse at home by spending money that we may not have available to us”. 

Budget 2026

The government has promised to tax changes over the next five years, including indexing credits and bands “to prevent an increase in the real burden of income tax”. 

The finance minister said the income tax changes already made in previous budgets are affordable, however, he cast doubt over any future changes that would put money back into people’s pockets. 

Donohoe said he will work with Public Expenditure Minister Jack Chambers during the year, ahead of October’s budget, to “further assess what changes in taxation are going to be appropriate in the context of Budget 2026″.

“It is possible that there will be a decline in tax revenue, but that will take place over the medium term, over a number of years. The exact magnitude of that change in tax revenue, we hope, will be in a position to better model, once the scale and duration of tariffs become clear,” added Donohoe. 

Given the grim warnings of possible tough times ahead, the minister was questioned on whether the government would consider another cost-of-living package, something the Tánaiste has already ruled out. 

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Donohoe doubled down on on that, stating that while he inflation has come down, he knows prices are still high. However, the cost-of-living measures “cannot continue”, he said. 

Another package would cost around €2.2 billion and is money that could be “better spent” in the years ahead, said Donohoe. 

His focus is trying to protect the taxes that are being collected, maintain public services, and protect jobs.

“And this is a case that we’ll have to make as we approach the budget in October,” said the finance minister. 

When asked specifically where he thinks unemployment rates might land, the minister confirmed he had been briefed by his department on what the effect of the impending tariffs might have on employment. 

“The best forecast that we can make at the moment is one of lower job creation and levels of unemployment across the medium term that either might stop falling at the pace they have been or could go up a bit. But our ability to be clearer regarding what could happen depends so much on the decisions that the US do make tomorrow and how the EU responds,” said Donohoe.

In terms of what positives could be gleaned, the minister said the European Union is approaching the tariff challenge when there are record levels of employment in the bloc.

Given the uncertainty in the US, investors are re-evaluating investing in the European Union.

“I think there’s a growing appreciation of the value of predictability and order on the global stage. Any changes that happen in the European Union won’t be sudden. They will be thought out. They’ll be predictable,” said Donohoe.