Ireland’s independent fiscal watchdog has raised concerns about the Government’s current approach to managing the public finances. The Irish Fiscal Advisory Council (Ifac) argues that the State is becoming increasingly reliant on volatile corporation tax receipts while allowing expenditure to grow at a pace that could prove difficult to maintain.
According to the council, the proportion of corporation tax being channelled into savings is falling sharply, despite record levels of revenue from US multinationals. It highlighted that the share being set aside is expected to drop from 32 per cent this year to 15 per cent by 2026.
The watchdog also criticised the absence of detailed budgetary projections beyond 2026. It noted that Ireland has not yet submitted an updated medium-term fiscal plan to the European Commission, even though other EU members have done so. Ifac maintains that moving away from annual budgeting would give public bodies better visibility of their future funding and would improve long-term planning across key sectors.
Council chair Seamus Coffey said the Government intends to run a smaller surplus next year while allowing expenditure to increase by more than 11 per cent in 2025. Ifac considers this rate of growth significantly above what it views as sustainable. Excluding corporation tax receipts, the underlying Exchequer deficit is projected at €7 billion this year and €14 billion next year, reflecting the gap between spending growth and more modest growth in tax revenues.
The council warned that taxes linked to a small number of multinational firms pose heightened risks because of their volatility. It argues that depending on these receipts to fund day-to-day services exposes the public finances to future shocks.
Political reaction has been swift. Opposition figures say the report confirms a lack of long-term planning, with several calling the current Budget framework unrealistic. They questioned how spending can continue at present levels without a clear medium-term plan or limits on annual increases.
Government representatives defended their position, pointing to substantial expenditure needs driven by population growth, earlier crises and sectoral pressures. The Tánaiste and Minister for Finance, Simon Harris, said producing a medium-term economic framework is his top priority and committed to completing this work before year end. He argued that anchoring tax and spending plans within a multi-year structure will be essential.
Taoiseach Micheál Martin said the State has been allocating considerable sums to future-proofing and capital investment, although he acknowledged that spending levels have risen markedly in recent years. He linked this rise to responses to the pandemic, the energy crisis and demographic pressures.
Ifac, however, remains unconvinced. The council emphasised that the credibility of the budgetary process is weakened when annual overruns, within-year policy decisions and supplementary allocations are not clearly reflected in the published figures. It noted that Ireland is one of the few EU countries without medium-term projections extending beyond the current Budget horizon.
Mr Coffey said the Government should be able to provide at least a baseline scenario for the years after 2026. He highlighted that recent supplementary spending decisions, including €2 billion in additional allocations for 2025, are still not fully incorporated into published estimates. He warned that the absence of such information makes it difficult to assess the sustainability of current plans or the risks created by heavy reliance on corporation tax.
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