Ireland to Borrow for Saving Funds Amid Rising Spending and Corporate Tax Reliance, IFAC Warns

The Irish Fiscal Advisory Council (IFAC) warns Ireland will need to borrow to meet its saving fund commitments, as the country plans to increase spending faster than any other European economy while remaining reliant on volatile corporate tax revenue.

The government established several saving funds, including the Social Insurance Fund and Future Ireland Fund, to safeguard public finances and finance long-term commitments. However, IFAC states the government intends to spend most of these risky revenues rather than save them, noting that planned surpluses are insufficient to fund contributions to these funds.

IFAC's report reveals that Ireland's budgetary deficit, excluding corporate tax receipts, is projected to widen from €11 billion this year to nearly €21 billion by 2030, increasing reliance on corporate tax. This deficit growth occurs despite a strong economy with high employment and rising wages. Critics, including IFAC, have long cautioned that a decline in corporate tax receipts, primarily from American tech and pharmaceutical companies, would leave a significant financial shortfall, making public finances unprepared for future pressures like an aging population and climate change.

Spending is set to increase by over 7% annually until 2030, exceeding the sustainable growth rate of around 5%. Revenue is increasingly concentrated in corporate and income tax, yet the government recently cut VAT for hospitality and spent significantly on energy supports. Persistent budgetary overruns in government departments, accounting for nearly 30% (€6.8 billion) of spending increases since Budget 2024, and poor budgetary forecasting, particularly for non-commercial semi-state bodies, are major contributors to these issues. IFAC recommends introducing domestic fiscal legislation to guide budget decisions.