The government has developed plans to accumulate €100 billion of surplus corporate tax receipts in a new state wealth fund over the next ten years, intended to mitigate future financial stresses. Finance Minister Michael McGrath and Public Expenditure Minister Paschal Donohoe have put forth legislation, following Cabinet confirmation, to institute two new national funds designed to secure the country’s financial health for the future.
Close to €4 billion or 0.8% of the GDP spurred by the corporate tax will be channelled annually into the novel Future Ireland Fund, commencing in 2024. The aim is to create a supplemental pool of monetary resources to bolster State expenditure, starting 2041.
Taking into account yearly contributions, GDP growth, and possible returns from investments, Minister McGrath indicated that the new fund has the potential to accumulate to €100 billion by 2035 and that there is no ceiling to its potential growth. He stated that this will provide the State with ample resources to handle the progressively demanding spending needs in the forthcoming decades.
The expected increase in pension costs, healthcare expenses due to an aging population, and the extra expenses required to transition to a low carbon economy are projected to charge the treasury an additional €7-€8 billion in “standstill” costs by 2030.
The new fund will be initially endowed with a sum of €4.1 billion, beyond the first annual segment, from the dissolution of the National Reserve Fund.
Mr. McGrath noted the current strong state of Ireland’s public finances, reinforced by record corporate tax receipts, which approximated almost €24 billion the prior year. He stressed that they must take measures currently to secure the public finances over the long term to guarantee they can accommodate the impending expenditure necessities.
Beyond this, Minister McGrath and Minister Donohoe also introduced legislation for a distinct infrastructural fund – the Infrastructure, Climate and Nature Fund – constructed to ensure that fiscal spending is sustained in case of future financial fluctuations. The plan is to invest €2 billion into this fund annually from 2024 to 2030.
The €14 billion contribution equals the mean annual quantity of capital expenditure under the National Development Plan spanning 2023-2028, as per the department’s report.
Minister Donohoe stated that the fund is envisioned as a source of support for the economy during periods of extraordinary demand. He noted it will contribute to regulating the investment flow to evade the disruptive ‘on-off’ public capital investment patterns witnessed previously.