Today, the government is set to release its latest Stability Programme Update (SPU), an annual report that provides an overview of its fiscal and economic projections for the forthcoming year. The SPU, a mandatory submission to the European authorities, is anticipated to express a largely positive outlook on the economy, given the decreasing rates of inflation and a resurgence in consumer expenditure following a significant cost-of-living crunch.
Projections anticipate a growth of 2-3 per cent in the Irish economy over the next few years, which is moderate yet beneficial, assuming there aren’t any unanticipated setbacks amidst the current climate of persistent crisis.
The main focus is likely to be the government’s financial situation prior to the budget and whether it intends to breach its own 5 per cent spending limit again next year. Adopted in 2021, this spending rule aims to keep the yearly growth in government expenditure under a 5 per cent cap, considered manageable for the Irish economy, but it has been exceeded every year since its establishment.
A major transgression in 2025 could indicate that the government is contemplating a larger budget before an election. While Finance Minister Michael McGrath will want to portray himself and the Coalition as financially cautious, pre-electoral budgets often serve other purposes.
The SPU will incorporate the government’s updated forecasts for corporation tax, which has already decreased by a quarter this year, following last year’s record collection of €23.6 million. Mr McGrath attributes this reduction to “timing issues” and anticipates it will be compensated later in the year.
The Department of Finance may provide insights into how the introduction of a global minimum corporate tax rate of 15 per cent, an increase from Ireland’s current rate of 12.5 per cent, may affect tax revenues after 2026. Despite being liable from this year, companies are not obligated to start paying until 2026.
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