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IRELAND’S FISCAL WATCHDOG has urged the next government to treat the country’s “extraordinary” corporation tax receipts “more like Norway treats its oil”.
“This means recognising it as a high-risk, finite resource and saving more,” said the Irish Fiscal Advisory Council, which was established to offer an independent view of how the Government manages its budget.
The IFAC said that budget policy by the outgoing government has “lost its anchor” and that just three companies account for over a third of the State’s corporate tax receipts, with a hit to one of these firms potentially resulting in “substantial falls”.
The warning comes as the same outgoing parties who have been in the watchdog’s firing line over what it considers boom to bust-style budgetary policy hold meetings to figure out their next steps when it comes to forming the next government.
Another Fianna Fáil/Fine Gael-led coalition is on the cards after Micheál Martin’s party secured the largest number of seats of any party at 48, ten more than Fine Gael.
Sinn Féin is the second largest party on 39 seats, but Martin has said he won’t go into coalition with them.
In a statement published today, the IFAC said that the next government can expect steady growth and substantial tax receipts. “Record employment rates and soaring tax receipts are not expected to unwind soon,” it said.
“This is good. But a lot will depend on two things. First, what happens corporation tax. Second, how the next government sets its budgets.”
The IFAC said the State’s public finances are being kept in surplus by “extraordinary” corporation tax receipts, which could well grow further as tax allowances end and the effective rate rises.
“However, these receipts remain high risk. As few as three companies account for about 40% of them. A hit to even a single firm could lead to substantial falls,” the watchdog said.
Last year, Ireland took in just under €24 billion in corporate tax. That number has grown this year, with corporation tax receipts boosting the State’s overall tax take by 15.4% in the first half of this year.
The IFAC previously said that while a surplus of €80 billion is projected between now and 2030, there is a deficit of €50 billion when corporation tax is excluded.
It has also repeatedly warned the previous coalition against breaking the National Spending Rule in successive budgets, something it did every year since the rule was introduced in 2021.
The rule in question seeks to keep increases to “core spending” – spending from the Exchequer – at 5% or lower. The figure of 5% was chosen because the economy was expected to grow by about 5% annually for the next few years.
This year, the fiscal council said Budget 2025 repeated “past mistakes” and said Ireland “needs a more serious vision that delivers on the economy’s needs without repeating the boom-to-bust pattern of its past”.
Today, the IFAC described how budget policy “has lost its anchor” and that this was “a danger” going forward.
“Inflation has eased. Yet net spending is growing rapidly. Even with inflation expected to be 2%, expansions are likely to remain high at 8% on average for 2024 and 2025,” it said.
It said that while the next government might be tempted to divert more corporation tax to spending increases and tax cuts, “in an already strong economy, this could mean further overspends, bad value for money, and delays”.
The biggest risk is that budgets continue in this vein and exceptional corporation taxes dry up. This would set public debt on a much riskier course. It would be painful to reverse, especially as pressures from an ageing population mount.
The IFAC made three recommendations to the next government in its statement. It said it should set out a sustainable rule that it will stick to in order to help curb pressures and avoid job losses in a future recession.
It also said the future coalition should “realistically” plan for health, housing and climate challenges.
“Ireland is already a high spender in health and housing. But it can get better value for its spend. On climate, Ireland can take more actions sooner to avoid heavy penalties later on,” it said.
Finally, the IFAC said that the next government should “treat its exceptional corporation tax receipts more like Norway treats its oil. This means recognising it as a high-risk, finite resource and saving more.”
Norway established a public fund after it discovered oil in the North Sea in order to shield the country’s economy from ups and downs in oil revenue. The fund also serves as a financial reserve and as a long-term savings plan.
The IFAC chairperson Seamus Coffey said that while Ireland is in a favourable position, a lot depends on how the next government budgets and manages corporation tax.
“The next government should put in place some guardrails in the form of a rule. This would ensure it doesn’t ramp up ongoing commitments as each budget day approaches,” he said.
“A rule and some realistic plans would help to tackle infrastructure deficits, ageing pressures, and climate needs, while also protecting growth, and limiting future job losses.”
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Is this the same Norway that pays out a dividend every year on the profits of oil and gas to its citizens. Profits from Irish oil and has fields that were sold off for pittance. Same pil and gas reserves on Ireland worth approx 750 billion, why didn’t we think of that
@DC: In 1989 FF minister for energy, Ray Burke, reduced the state’s 50% share in its offshore oil and gas to zero. He also abolished royalties. It was under these terms that a frontier licence was awarded to explore the area off the north-westcoast of Ireland in 1993. Three years later, large reserves of gas were found 80km from the Mayo coast, in what has become known as the Corrib gasfield.
Good aul corrupt FF.
@chewy: Corrib has approximately 1TCF of gas recoverable per operators with likely a few smaller pockets very much like Kinsale head off Cork so not huge. It was discovered by Enterprise and no royalty was paid but a special corporation tax of 25% and 40% was introduced, however it’s costs of development soared due to protesting the refinery, Shell had bought out Enterprise by then and the rest is history, Vermillion of Canada now own it now and it’s coming to it’s life’s end. And we’ll see if more is found.
The idea of no royalty was to encourage exploration and that really hasn’t happened as things aren’t as easy as people think. We have/had 2 commercial gas fields as mentioned above and those are tiny in comparison to Norway.
@DC: That figure was computed 600bn at the time was a fella doing his PHD and extrapolated from seismic maps. Yes there was much optimistic talk around that time. Marathon drilled a hole in the south porcupine in 1997 and we found nothing the cost was $100m , this was when drilling was cheap, Exxon, Shell, Occidental and Providence Resources drilled the west coast and while evidence was mixed the development costs were huge , billions. The west coast is one of the harshest environments for hydrocarbon production globally and they all pulled anchor and never returned.
If 600bn was there it would be found and exploited but it hasn’t as it was a thesis figure.
@DC: We’re new here, and have a lot of baggage.
@DC:
, Mark in a map of Irish Territorial waters where all this Oil and gas reserves are so we can extract it.
That would be great.
@Paul O’Mahoney:
Norway has a strike rate of one in four holes drilled so it’s easy for the Norwegian government to fund drilling and hang on to the profits.
Irelands strike rate is around one to one hundred holes drilled. Which is why we have to intice privates company’s to take the risk of drilling.
At over 100 million a bore hole it’s a big risk.
@DC: two major oil and gas feilds alone off barryroe another off Dublin but the green goblins eamon ryan refuses drilling licence we will need this oil if Ukrainian war gets worse nobody will be building windmills but tanks it’s already started in the eu
@H Woo: And we have drilled 159 and have 2 commercial finds, with a few pockets surrounding those.
@John Reynolds: Go ahead name them and then we can perhaps have discussion…..but immediately I know that you don’t have the details.
@DC: because it was the usual numpties in power that caused the housing crisis and cost of living debacle and don’t and won’t have the forward thinking that is required .That’s what you get when you have schoolteachers running the country
Paying down our debt that is one if highest in world per capitata might be smarter..
We’re paying billions in debt every years.
@Sickof thisshit: we don’t talk about that.
The media don’t talk about that.
Hilarious – Norway doesn’t have its youth emigrating because there’s no housing for them. Corporation tax won’t change that.
@Sickof thisshit: Stop talking absolute rot! How do you think we are are going to keep paying to house tens of thousands of randomers from other countries to stay here in tents, hotels and b n b’s constantly, if we don’t dip into the taxes of the struggling Irish workers? It obviously makes sense that struggling Irish people should work their asses off to pay for a new start in life for other people from who cares where. That makes total sense, right? Right? Totes, babes! Just keep working and paying tax and DONT ASK QUESTIONS
@Joseph Heinzberg: your anti-immigrant crowd all got rejected. Zero seats.
@Sickof thisshit: It’s already being paid down and is reducing.
@Joseph Heinzberg: bring bleach
@Peter McGlynn: for one of the wealthy countries in the world we seem to have a shit ton of debt and spend money on other countries problems like it’s going outta fashion
@Sickof thisshit: none of that will happen, as the same crew has been reelected
@Peter McGlynn: the youth will always emigrate. If you think leaving ireland for a house in either Australia or, Canada or Dubai, you are in for a big shock
@Sickof thisshit: Our debt is now 42% of GDP and interest is 1.5% per year very low by international standards. The National Debt never gets paid as its rolled over and nobody will come looking to citizens for it to be paid .
The statistic is a silly one , per capita, GDP and GNI per capita is obviously higher but is never mentioned.
@another one? what’s going on is the semi state sec: That’s inflation too, it’s about 200bn net now and our biggest holder is the EU at 146bn last time I checked.
@Paul O’Mahoney: total bs. Pulling figures out of Ur hole. The rate is short term and we are paying billions a year on interest. If national debt was a good thing why don’t Norway have one, because they have a competent government that manage their national assets and look after their country
@Pork Hunt: Well you are showing your ignorance there have a look at the last NTMA report and the comments it all there. Interest is about 3.5bn give or take. Norway has debt too again a simple thing for you look up if you wish.
Try starting a sentence with English….it makes your post more interesting….even if you’re not .
@Sickof thisshit: €230bn in debt and bad bank assets blown. Glad I don’t have kids because they will be paying this off and more. And what will we do when we’ve no home grown Irish companies and the multinationals move elsewhere?
@Peter McGlynn: Norway has $224bn
@Sickof thisshit:don’t care about the economy.40 homeless people died on Dublin’s streets . And all ye care about is making the rich richer . Ye voted for the people that killed these people . the Irish people don’t deserve happiness or anything for what they have done and more people will die on the streets. All down to the Irish people
@Peter McGlynn: All western countries carry debt, and some countries have huge cover for it, like Norway. For us it’s our houses that makes up our net wealth at 700bn , with 400bn in financial products like pensions I don’t know if the 160bn in savings is included in that….
One group that is included in our debt is post office savings and Savings bonds at 20bn it’s not a small number.
@Peter McGlynn:
And Sinn Fein doesn’t understand what it is if you listen to their spend more then the government replays in the Dail.
@Paul O’Mahoney: It was reported that the recent budget allocated €15 billion to service the National Debt for next year.
@ItWasLikeThatWhenIGotHere: Are you sure the figures are on the NTMA. That certainly doesn’t sound right.
@Sickof thisshit: Ireland has one of the highest debt per capita in the world after USA, UK, France, Germany, Netherlands, South Korea, Japan and Luxembourg. Just a little bit of context is useful, I find.
@ItWasLikeThatWhenIGotHere: Had a look and yes interest is 1.5% maybe there’s maturity of bonds .
.next year…..
@another one? what’s going on is the semi state sec: Despite getting loans every year? It is a completely unrealistic prospect to pay down your national debt without stripping all public services of finances, likely the goal though.
@Joseph Heinzberg: Heinzberg, a tradational Irish name
@Sickof thisshit:
They are kind of…
They have set up a Sovereign Wealth Fund to counteract our National Debt. The aim is to put 0.8% of our GDP into this fund every year until 2035.
This would be 43 billion by then on todays GDP… There is a hope that could be close to 100 billion by then (interest and rising GDP).
That would counteract out 239 bn National Debt but still allows us to draw in case of a sudden downturn (instead of needing to goto Bond Market)
@Peter McGlynn:
Actually Norway have 30,000 leave each year… Ireland has about 70,00… But saying that we speak English and 22,000 went to the UK…
I got that all from the Media… I thinklyou meant to say, that you don’t listen to the Media.
@Pork Hunt:
Government in Norway is obligated by law to balance its budget without relieing on oil revenues.
@Jack Dermody: And we have about 30000 coming home every year too…on average.
@ItWasLikeThatWhenIGotHere: There’s 13bn to be paid next year with 6 to 10 bn to be issued. Average now a weighted one over 14.7 yrs is 2.3%
@Soundy Sound: Actually it’s mid table again NTMA report will show this …..we are better that all EU27 and Euro 19 too by a couple of basis points.
They couldn’t help themselves with spending promises leading up to the election of all kinds of craziness. The only saving grace is that politicians very often don’t follow through with what they promise or hint at. It comes to something when you are left hoping they don’t and that they don’t splash money on all sorts of waste. Housing and infrastructure (transport, energy, waste, water) is where a lot of it should go with some going into wealth funds. Pay down any especially expensive debt if there is any. I know they will say that they are doing all of these things but a load of this money will inevitably be flushed down the toilet. Bike sheds, security huts, curtains etc.
@John Moore:
The government had to counter Sinn Fein constanly saying they will increase spending on this and that.
Hopefully now that the adults are back in goverinment they will be a bit more relistic.
It’s beginning to look a lot like 2006
Now you why the children’s hospital is running over budget. With a surplus like that, private companies would be mad not to up the price anyway they can.
Who’s this watchdog anyway?
Yet we are borrowing 10bn next year ..
What a mess
@MN: We do that every year pay off some borrow more at cheaper rates hopefully.
@MN:
We are constantly borrowing at cheaper rates and paying off loans that are expensive to service.
@MN: But are redeeming 13bn
Maybe if we did not have such a stupid bunch in power we would actually like Norway be generating income from the huge Barryroe Oil and Gas field off the coast of Cork. The one that Eamonn Ryan stopped being brought Into production
@Keith+P McDonald: Barryroe was called Seven Heads and discovered my Marathon Oil, it has changed hands many times, Marathon tried development and even with 2 gas platforms next door to help pump gas to Inch ,east Cork, didn’t proceed, Ramco then had a go , but gave up Providence Resources were next but couldn’t get the funding even from the Chinese.
Apparently the reservoir is fractured and it would take multiple subsea wellheads and kms of connecting pipelines to get anything out and ashore and the cost is simply prohibitive to oil companies.
I’ve worked for Marathon and Providence and was a project accountant for both, oil and gas needs to make profit have an Roi and positive cash flow, 7 heads didn’t have these basic things.
@Paul O’Mahoney: Ah now, Paul! Stop spouting facts. The only thing important around here is uninformed opinion.
@Me Me: It’s impossible for me to that I’ve lead a varied life, and I can’t bring my knowledge with me, so I’m sharing.
@Paul O’Mahoney: 100%
the market stall mantra remains, be it oil, gas, sugar or people… sell sell sell, if they built anything with the money everyone would be fine about it really.
Can anyone smell that in the air……it smells like 2006 all over again except even more deluded and less qualified muppets are running the ship this time. All those goodies given away to secure FFG another 4 years will come back and kick us in the backside and the beautiful irony is nobody in power can tell all the young folk to leave cos we have literally allowed immigration to turn into the biggest for profit con job ever seen…….oh them chickens, them chickens, them lovely chickens are a coming home to roost
@Patrick Newell: translation???… in English please
@Patrick Newell: Nah its slightly different most of the stuff then was housing and having too much of it, 100% mortgages banks lending huge amounts on speculation. Now we don’t have enough houses, banks aren’t lending to speculation. Most houses are being built with Venture Capital money now thus the problem of supply.
We’re in a good place but there are issues as we all know, spending/waste and despite all the income and full employment there’s a disconnect and the country seems unbalanced. Regulation is a joke here, and The taxpayer gets little for their money.
Solutions are there but will they be implemented….who knows.
@Frank Mc Carthy: ah Frank, maybe try reading it again, slowly this time – it’s not that difficult to understand. I’m not saying I agree with him, mind
@Patrick Newell:
Sinn Fein were in a Bidding war with the goverment, so maybe we are lucky they are not taken over considering the mess they are making administering the North on behalf of his majesty’s government.
Good thing Sinn Fein won’t be in power. They wanted to spend it all right away!
@Sam Walsh: Their ideological desire to nationalise housing and industry would have devastated the country, driving the big tax sources overseas. The poor that they claim to care about would and do suffer the most under socialism.
@Sam Walsh: Well, thats just a guess. We have an existing model for FF tho.
@Dave G Doe: is that you Doe, or just an irritating pimple.
There was a story in the wall street journal last week saying the we had created wealth funds thanks to the US companies. It’s correct but it doesn’t mention that they choose to come here not just for tax but the workforce and as an English speaking country in the EU.
There are storm clouds on the horizon and it’s unknown what will be the effects of Trump tariffs etc . It would be wise to stuff those funds with as much as possible including all the Apple windfall. They have started but the figures are small and if most think the new tax proposals by Trump will cost us 10bn ……if we don’t we will be in trouble again.
@Paul O’Mahoney: Carbon tax fine in 2030, 20bn. The messages coming out of the media are that future increased taxes and a hold (or maybe a continued non start) on any infrastructure will be justified. They’ll build houses for sure as they can make money, continue to short the HSE with VHi but wouldn’t expect say the cork Limerick M road to be finished (in our lifetimes)
@Thesaltyurchin: That’s the upper end it’s thought that it’s 8.2bn if nothing else is done, RtE reported 20bn Business post and Farmers Journal reported 8.2 .
Still a chunk of money…if it happens.
They should have bought Bitcoin or XRP, but our government is in the dark ages when it comes to crypto. Failure to make Ireland a crypto friendly nation will deter a lot of foreign investment particularly in tech and finance.
@Fidgenti: yeah, ‘investing’ in crypto currency is the answer…. there’s a horse running in the 12:45 at Market Rasen called ‘Viyanni’…..I reckon he’s a sure thing…government should put the apple windfall billions on him, lol
@Fidgenti: Agreed they should be dabbling, XRP about to be rolled out in Japan? (3rd biggest global economy), if only to understand it better, at some point there may well be an Irish central bank currency, hopefully they are and we just don’t need to here about it, save the lantern jaws gasping for air (as above).
@Fidgenti:
Magic beans
@Frank Mc Carthy: that horse WON by a country mile
No decision should be made without the personal approval of Harris.
What’s the point in having a fiscal watchdog when our government does not listen to the advice?
Norway are not depriving other states of their rightful oil, but Ireland and tax is a very different story. Some chops to make this comparison.
@Darius Guppy: Ask Denmark about that and the famous meeting in the early 70s
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