Ireland should set aside part of 2022 budget surplus – deputy PM

8:38 am Tuesday, July 05th, 2022

DUBLIN (Reuters) – Ireland should set aside some of the budget surplus it expects to post this year to fund future pensions or to start refilling its currently empty contingency reserve fund, Deputy Prime Minister Leo Varadkar said on Tuesday.

The finance ministry on Monday forecast that Ireland would run a budget surplus of up to 0.5% of gross domestic product this year rather than the small deficit previously anticipated, primarily due to a further surge in corporate tax receipts.

The government has pledged to use the better fiscal position to introduce an unspecified amount of one-off measures above and beyond its already boosted budget day package to help people cope with the highest level of inflation in almost 40 years.

“My view is we shouldn’t spend all of that, we should give a lot of that back to people because people need help with the cost of living of course but we should probably set some of it aside as well,” Leo Varadkar told national broadcaster RTE.

“A huge amount of that is corporation profit tax receipts, which are going to continue to improve over the next couple of years but they won’t forever and it would make sense to put some of that surplus away, whether that’s into the rainy day fund or into the social insurance fund for future pensions.”

Ireland’s fiscal watchdog, which has been warning for some time that excess corporate tax receipts should not be used to fund permanent government spending, said earlier on Tuesday that they should be put into the rainy day fund or a new pension reserve fund.

Ireland opened the rainy day fund in 2019 and had planned to boost it to 8 billion euros over time before the COVID-19 pandemic hit and it used the 1.5 billion euros in the fund to help the economy weather a series of lockdowns.

The finance ministry’s chief economist warned on Monday that the reliance on just 10 multinational firms to pay over half of the soaring corporate tax receipts represented an “incredible level of vulnerability” for the economy.

Ireland’s large hub of multinational firms employ around one in nine Irish workers and Varadkar said that the state’s foreign investment agency would announce the best ever half year of job creation for the sector on Wednesday.

(Reporting by Padraic Halpin; Editing by Angus MacSwan)