The Irish Fiscal Advisory Council has warned that two long terms savings funds, established by the Government to retain some of the corporation tax paid by multinationals, will have to be part-funded by borrowing.
The development occurred because the Coalition plans to spend the bulk of the corporation tax it receives from multinationals.
The council expects Ireland’s national debt will increase from €220 billion to €250 billion by the end of the decade as the Government borrows money to finance payments for the savings funds.
“This departs from the original purpose of those funds, which was to save, rather than spend, risky corporation tax receipts,” the council said.
It will mean the State will have to pay interest on the borrowings, which will go to finance the payments to the savings funds.
In its latest report, the Fiscal Advisory Council said the Government should instead focus on running bigger surpluses.
The council’s chair Seamus Coffey said: “The key concern is that corporation tax that was planned to be put in these funds is actually being spent.”
He added €5 out of every €6 which is collected by the State in corporation tax is now being spent.
The warnings come as concerns rise that Ireland is becoming increasingly dependent on volatile corporation tax payments.
The top taxpayers have been pharmaceutical company Eli Lilly and technology giants Microsoft and Apple.
The three groups have been responsible for half of Ireland’s corporation tax payments.
The council is also critical of Government overruns where spending exceeds targets.
It said: “Sizeable overruns are already apparent for 2026.”
It added: “The government’s expenditure ceiling for 2026 has already been increased by €0.7 billion.
“This is due to education overruns and energy supports which have been introduced.”
It said between 2025 and 2030 spending will increase by 7% per annum, which is “well above” the sustainable growth rate of the economy of around 5%.
The council said Ireland’s medium-term plan shows it has the fastest net spending growth in the EU.
The Irish Fiscal Advisory Council has called on the Government to ensure its budgetary policy reduces the ups and downs of the economic cycle.
It also wants to see the introduction of a national rule to guide spending growth.
