The government is set to have a record-breaking budget surplus of €25.4 billion this year, marking a significant milestone for Ireland and standing as one of the highest in accordance to the ratio of national income in any nation. The recent European Court of Justice ruling on Apple, obligating them to a payment of approximately €14.1 billion, provides a sizeable boost to this surplus. The pre-budget figures revealed in this weekend’s White Paper also attribute this excess to an increase in corporation and income tax collections.
This unprecedented bounty places the government in a favourable position in two ways. Firstly, the sizeable forecasted surplus for 2024 offers sufficient leeway to cover one-off payments to households, including energy credits, expanded child benefits and bespoke welfare measures, while still reserving a considerable surplus for the year. Supplementary estimates to tackle overspending, however, are likely to reduce the final surplus reported for the year.
Secondly, the treasury will maintain a surplus of nearly €11.8 billion in the forthcoming year before any budget day declarations are considered. This provides adequate room to execute intended budget tax and spending plans, maintain a surplus, while enabling the allocation of €6 billion to a pair of future investment funds.
The surplus numbers rely on a computation method prescribed by the European Union, which requires the government to include all of Apple’s pending payment in the 2024 numbers, as its arrival is assured. Although the forecast is for €8 billion to be remitted this year and the considerable balance in 2025, the delay does not pose any concerns given the exchequer’s extensive monetary resources.
As we move towards Budget 2025, there are propositions of numerous measures including inheritance tax thresholds increasing to €400,000, tax cuts, mortgage interest relief and others signify the government’s final attempt at reshaping their economic blueprint. The record-breaking surplus of €25bn fortifies the government’s preparations for the impending budget.
As the metrics are calculated based on a different benchmark, the Exchequer cash balance data suggests lesser values with a surplus of €13.5 billion this year and €9.6 billion the following year. These numbers take into account funds such as the surplus of the social security fund which finances several social benefits, as well as unique cases like the Apple funding. The metrics now more widely adopted – the general government balance – also factor in these numbers.
Highlighting the potential purchasing power for the forthcoming government as we approach a general election, ongoing reinforcement and improvement of public service funding and state investment appear viable. Expect a surplus of manifesto pledges.
The financial influence of Apple is anticipated to substantially elevate the total, whilst the engine fuelling this is corporate tax. Forecasts for this year predict corporate tax figures to reach approximately €29.5 billion before the addition of Apple’s funds, a boost from the mid-year projection of €24.5 billion. Despite Apple’s contribution being excluded from next year’s projection, a similar corporate tax level is anticipated by the Department of Finance. The undisclosed factors contributing to this, including the effects of established Organisation for Economic Collaboration and Development reforms, may again be underestimated if the current trajectory is upheld.
In correlation, PRSI payments have seen an uplift, due to the vigorous job market stimulating income tax and resulting in a substantial social insurance fund surplus. The income tax figures for this year are projected to be €35.095 billion, with an optimistic 6.8% increase anticipated for next year to reach €37.5 billion. The budget for the forthcoming year will provide the corresponding employment data, with VAT predicted to experience a 4.1% increase to €22.5 billion.
Coming years’ tax revenue is expected to surpass the current total of €105.78 billion, reaching €106 billion in 2025, although the comparison is influenced by Apple’s high payments this year.
The cautiously optimistic forecast continues to remain susceptible to economic disruptions. Nevertheless, current prosperous public financial conditions could cushion a period of reduced economic growth. Outside the surplus and Apple’s contributions, the National Treasury Management Agency possesses cash balances nearing €26 billion, and this figure excludes the predicted Apple funding.
Looking into the future, the demands of an ageing population alongside climate change adaptations may necessitate elevated expenditure and possibly higher taxes. However, there currently exists ample financial flexibility within the public sector.