Blog post, 9th April 2025
Ireland’s public finances have been shaped by surging corporation tax receipts over the past decade. But now there are signs of tectonic plates shifting.
Sweeping tariffs and talk of a push to reshore activities threaten these receipts. But an opposing force is OECD tax reforms.
A new paper by Brian Cronin (2025) estimates that the OECD tax reforms could yield Ireland more corporation tax. At the same time, it could make concentrated receipts even more concentrated among a small number of companies.
These opposing forces add to the uncertainty. The crucial point for the Government is this: don’t treat these resources as permanent. Plan to ensure Ireland’s prosperity.
Shifting plates
The US has introduced sweeping tariffs in recent weeks. It has upended trade norms and is talking about a push to bring back both manufacturing activity and intellectual property.
The shift in the US policy stance poses substantial risks to Irish corporation tax receipts. Ireland’s corporation tax accounts for just over a quarter of all tax receipts. About three-quarters of those receipts are paid by large U.S. multinationals. At some €20 billion, that equates to the Government’s combined spend on hospital services, primary schools, and secondary schools in 2023.
However, a new paper (Cronin, 2025) finds that recent tax reforms linked to the OECD’s Pillar II could bring in more corporation tax than otherwise would have been the case. Ireland’s statutory corporation tax rate is 12.5%. The new global minimum effective tax rate of 15% means that many large multinational corporations operating in Ireland will face a top-up tax. This top-up tax will effectively bridge the gap between their current effective tax rate and the 15% threshold.
On their own, the reforms would boost Ireland’s corporation tax receipts from 2026. The paper estimates a near 20% increase, about €5 billion. Of course, this assumes large multinationals pay the higher tax rate and maintain activities in Ireland. And the paper doesn’t forecast that overall corporation tax will be higher, only that it would be higher than without the top-up tax. It also comes with another risk: more concentration.
Super saturation
If the paper’s estimates are right, it would entail a small number of high-payers becoming even higher payers. It would amount to increasing Ireland’s already high reliance on a small number of large multinationals for corporation tax.
Ireland’s corporation tax base is already highly concentrated. A small number of large foreign-owned multinationals, primarily in the technology and pharmaceutical sectors, contribute the lion’s share of receipts. In 2023, it is estimated that just three firms accounted for 38% of all corporation tax revenue.
The global minimum tax could exacerbate this, making Ireland’s public finances even more reliant on policies and profits related to a few key players. The paper describes this as a state of “super saturation”. The term, borrowed from chemistry, means a state of heightened concentration that is ultimately unsustainable. It is a delicate balance that can quickly shift. In this vein, Ireland has accumulated an unusually high concentration of tax revenue from a handful of corporations, far beyond what might be considered stable or sustainable. This state is precarious. If conditions change, as appears to be happening, it can lead to abrupt disruptions. It might be due to corporations experiencing lower profits, relocating some operations, or other policy changes. Regardless, it’s high risk.
Plan
The Council has long argued that the Government resist the temptation to treat such receipts as a permanent fixture. A serious plan to address this vulnerability is well overdue. We need to learn from Ireland’s past experiences with flighty revenues and commit to a strategy that delivers robust long-term growth.
One attempt to produce options on how to do this was provided by the Commission on Taxation and Welfare (2022). Their 547-page report recommended broad initiatives to counteract Ireland’s “long-term overdependence” on corporation tax. As it stands budgetary plans expect to use about half of the “excess” or “windfall” receipts projected for 2025–2030.
The Government doesn’t necessarily have to unwind its reliance immediately. Simulations by the Fiscal Council showed that even with all of the excess gone, the Government’s debt ratio would remain relatively stable over the next decade.
But there are potentially bigger concerns. What if this signals a longer term shift in multinational operations in Ireland? What if new drugs are now going to be produced more in the US than in Ireland? What if new jobs and investment in tech happens there rather than here? These questions are incredibly difficult to answer.
This could spell a potentially trickier environment to achieve the same pace of growth Ireland was used to in recent years.
These risks are something Ireland should have been planning for anyway. The experience of the Netherlands in the 1970s, often referred to as “Dutch Disease” serves as a cautionary tale. After discovering vast natural gas reserves, this led to a boom in the energy sector and beyond. But this reliance had negative consequences. It led to prices and wages rising faster in other parts of the economy. This left the Netherlands facing economic challenges as traditional industries became far less competitive. Ireland’s situation with corporation tax shares similarities with this resource curse. Substantial revenues, inherent volatility, and risks things don’t last. Unlike natural gas reserves, there is no geological survey to help us predict when these “excess” corporation tax receipts might dry up. Relying on a few multinationals exposes Ireland’s public finances to risks related to policy changes, regulatory shifts, and major business-specific disruptions.
What can the Government do?
There are three things the Government can do.
First, it can plan to gradually save a larger share of the “excess” corporation tax it takes in. While Ireland has started to allocate some of these funds to savings mechanisms like the Future Ireland Fund and the Infrastructure, Climate and Nature Fund, it should save more than the one-third currently planned. This would mirror how Norway treats its oil revenues, saving most of these and only spending the investment fund returns. By allocating more to its Future Ireland Fund, Ireland can create a stable future income stream to offset future costs, such as those associated with an aging population. Effectively, this transforms large, high-risk receipts into smaller, low risk receipts.
Second, the Government can prioritise investments that boost Ireland’s long-term productive capacity and competitiveness. This includes strategic investments in infrastructure, such as housing, transport, and energy where Ireland lags other high-income European countries. Improving productivity goes beyond throwing money at things — it means speeding up delivery and encouraging greater productivity.
Third, the Government can refocus efforts to diversify the economy. It can foster growth in high-value sectors less exposed to current risks. This would reduce Ireland’s reliance on the current concentration of multinational corporations.
Crisitunity
Homer Simpson coined the phrase “Crisitunity” when his daughter, Lisa, told him to look on the bright side: that “the Chinese use the same word for “crisis” as they do for “opportunity””.
The Irish Government might reflect on the opportunities that are being cast by current developments. A sound strategy focused on gradually saving a larger share of risky receipts, prioritising productivity and infrastructure, and diversifying the economy will be crucial to maintaining prosperity as the landscape shifts. By embracing sound fiscal and economic planning, Ireland can navigate this terrain in a way that can further enhance its long-term resilience.
Read the full paper
