Seen from France, in continuous deficit for decades, the prospect is dreamy: Ireland will generate a budget surplus of 10 billion euros this year. And this should even continue in the coming years, so much so that the accumulated surplus could reach 65 billion euros by 2026.
A result to make any European country green with envy, and which is mainly due to the tax attractiveness of the island state. Its reduced corporate tax rate (12.5% compared to 25% in France, for example) has encouraged many large multinationals to set up their European headquarters in Dublin.
Many digital giants (Apple, Google, Meta, etc.), but also pharmaceutical companies, such as Pfizer, whose activity has increased sharply due to the Covid-19 pandemic. Corporate tax should thus bring Ireland about 25 billion euros this year, an amount up 7% over one year. Moreover, for Dublin, Brexit is now a new asset to attract foreign companies.
For the Irish government, the question now arises of how to use these massive surpluses. A rich man’s problem, but a problem nonetheless. Because this hoard carries immense expectations, each one going with their own proposal. The Irish executive has already announced that it will place part of this revenue in two soon-to-be-created funds: a sovereign wealth fund, i.e. a long-term reserve fund, and a public investment fund, intended to guarantee spending on key infrastructure projects even in the face of an economic downturn.
But already, these plans are not unanimous. While Irish Finance Minister Michael McGrath would like to reserve part of these sums to cover the future increase in expenditure linked to the aging of the population, some, particularly in the opposition, are calling for this windfall to be spent immediately to deal with the crisis. unprecedented housing hitting the country.
“The difficulty is that the economy is almost at full employment, so there are simply not the people available to build housing or other types of infrastructure”, underlines Professor Alan Barrett, director general of Dublin Institute for Economic and Social Research, BBC. This could lead, according to the economist, to “wage inflation, because there are simply no workers available”.
The Irish executive has also put forward the idea of using this windfall to repay part of the Irish debt, which does not convince the opposition. Some voices suggest otherwise to take advantage of it to increase the budget of the army, others to finance the climate transition.
In an article published last June, The Irish Times cites another idea, more absurd and which the newspaper itself considers “unlikely”: the proceeds from the future sovereign wealth fund could make it possible to acquire a football club, like the have done Qatar with Paris Saint-Germain, the United Arab Emirates with Manchester City or Saudi Arabia with the English club Newcastle.
The debate, which promises to be fierce, has only just begun. The next big step is scheduled for October 10, when the 2024 budget is presented: Ireland’s finance minister is due to announce how much to invest in each fund for the coming decade. And the subject should be at the heart of the next campaign for the general elections, scheduled for March 2025, for which the leftist opposition party of Sinn Féin is leading the polls.
