What to do with a budget surplus of 10,000 million euros? In many countries like France, in a continuous deficit since 1974, the question might come as a surprise. In Ireland, however, it is the one that has been driving the debate for several months.
According to data from financial times transmitted by international mailIreland’s budget surplus reached €8 billion in 2022 and is expected to reach €10 billion this year.
Ireland owes this stroke of luck in large part to the very good post-Covid results of the technological and pharmaceutical multinationals established in its territory. It must be said that the Emerald Isle, with a particularly low corporate tax rate (12.5%, compared to 25% in France), remains particularly attractive for large groups. The corporate tax, whose income comes in two thirds from ten companies, is also the second source of income for the State, after income tax.
“As a country, we live in an unusual situation: we live within our means,” observes Irish economist Seamus Coffey in theirish examiner. So much so that politicians are wondering how best to allocate the budget surplus.
Build homes or invest in a sovereign wealth fund?
Given the real estate crisis that is affecting the country and particularly the capital Dublin, the opposition suggests using this fiscal bonanza to build homes. It’s not that simple, Professor Alan Barrett of the Dublin Institute for Economic and Social Research told the BBC. The latter recalls that Ireland is at full employment and that, therefore, it would be difficult to find the necessary manpower to implement a large housing or infrastructure construction plan.
For its part, the Armed Services Committee calls for an increase in the budget of the Irish army, which is currently the lowest in the European Union (0.3% of GDP in 2022). But the Government advocates for another solution, debated a few weeks ago in the Irish Parliament: reinvesting exceptional tax revenue in a sovereign fund that allows paying pensions and health expenses in a context of demographic ageing.
However, nothing is resolved at this stage. The debate is set to continue, and probably for several more years, as Ireland’s budget surplus could reach €65bn by 2027.
Source: BFM TV
