State funds intend to save some of the massive inflow of corporation tax
With the creation of two State wealth funds, some €6 billion is being effectively taken off the table for October’s budget and saved for the future, Photograph: Javier Ghersi .iStockto establish two funds to save some of the massive inflow of corporation tax for future use. It is a prudent plan, given the unpredictability of these revenues.
These forecasts will be revised in the Department of Finance Stability Programme Update, due to be published shortly, when the point about the reduced room for budget measures – and the ongoing uncertainty about corporation tax – are both likely to be underlined. This leads to one awkward political question: are the temporary measures announced to support living standards during the cost of-living crisis to be repeated? Or, with the rate of inflation falling – but prices still high – will the Government try to phase out giveaways such as the energy credit?
The Department of Finance has estimated that not far off half of all corporate tax collected in the State may be windfall in nature, meaning it does not relate directly to economic activity here and is thus vulnerable to decisions made by big companies. Money is due to go into this fund up to 2030 and it is designed to be available in the event of an economic downturn, to ensure that the State could continue to invest; slashing investment spending after the financial crash has had a huge economic cost for Ireland. This fund, as its name suggests, it also to help pay for future climate and nature investment from 2026 on.
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