Ireland’s independent fiscal watchdog has issued one of its strongest warnings in years, accusing the Government of “budgeting like there’s no tomorrow” as soaring tax revenues from US multinationals continue to mask growing vulnerabilities in the public finances.
Despite the extraordinary level of corporation tax flowing into the Exchequer, the Irish Fiscal Advisory Council (IFAC) says the Government is setting aside a shrinking share of these windfall revenues, raising serious concerns about long-term stability.
According to the council, the proportion of corporation tax being saved will fall from 32% this year to just 15% in 2026, even as these revenues remain highly volatile. This comes alongside another red flag: there are currently no official budgetary forecasts beyond 2026, and Ireland has yet to submit a revised medium-term fiscal plan to the European Commission.
IFAC argues that this short-term approach makes it harder for the State to plan responsibly. The watchdog is urging the Government to move away from year-to-year budgeting and instead adopt a multi-annual framework. Such a system, they say, would give public bodies more financial certainty and help improve the delivery of public services.
The watchdog’s concerns go beyond forecasting. It also warns that Government spending is accelerating at an unsustainable pace, with expenditure set to grow by over 11% in 2025 – a rate IFAC describes as “much faster” than the economy can reasonably support.
Council chairman Seamus Coffey said the “Government plans to run a smaller surplus next year,” a shift that comes even as underlying deficits deepen when unreliable corporation taxes are excluded.
The figures paint a stark picture. When volatile multinational tax receipts are stripped out, Ireland is running an underlying deficit of €7 billion this year, projected to widen to €14 billion next year. IFAC emphasises that relying on a small number of multinationals to sustain day-to-day spending is deeply risky and leaves the State exposed should even one major company shift operations.
The watchdog is also sharply critical of the Government’s record on sticking to its own spending limits. It notes that “spending forecasts have been repeatedly revised up,” with projected 2025 expenditure now €12.5 billion higher than what was outlined in Budget 2024.
Previous spending caps set by the last government — 5.1% growth for this year and 6.5% next year — have already been exceeded, with spending now expected to rise by 8.6% and 7.7% instead.
Responding to the report, Tánaiste Simon Harris, who also serves as Minister for Finance, said his “number one immediate priority” is to deliver a comprehensive medium-term economic plan. He stressed the need to avoid “the temptation for short-termism” and said he aims to have the framework completed by the end of the year. Harris added that he recently held a “really good meeting” with IFAC and welcomed the council’s input.
Speaking separately, Taoiseach Micheál Martin insisted the Government is, in fact, putting “substantial funding aside”, and argued that it is the opposition who wants the State to “spend like there’s no tomorrow.”
But the Taoiseach also acknowledged that “the level of expenditure in the last number of years has been high,” noting the unavoidable pressures created by Covid, the energy crisis, population growth and higher costs linked to tariffs. He said much of the State’s upcoming spending remains focused on capital investment, including housing, infrastructure and climate commitments.
While Ireland’s tax windfall has allowed the Government to spend more and cushion households through difficult years, the underlying vulnerabilities are growing. And unless the State begins saving more of its boom-time revenues and planning further ahead, the public finances could face sharp shocks in the years to come.