DUBLIN — Ireland unveiled a whopping €11 billion budget Tuesday designed to shelter households and businesses from runaway energy bills and a home-grown housing crisis.
The unprecedented package of expanded benefits and tax cuts by Finance Minister Paschal Donohoe represents €2,200 for every man, woman and child in Ireland. It includes hikes in welfare and pension payments, sharply increased state subsidies on energy bills and child care, free schoolbooks and pruned university fees, and even new income tax credits to counteract sky-high rents in Europe’s most expensive housing market.
Ireland can spend like this without going into deficit thanks only to its ever-rising collection of tax from the profits of 1,700 foreign multinationals based in the country, among them a who’s who of top U.S. tech and pharma firms.
The Irish expect to net a record €21 billion from these corporations this year, triple the amount from just six years ago and €6 billion above initial 2022 forecasts. As a result, despite the vast expansion in reliefs and tax cuts, Ireland still expects a €1 billion budget surplus this year and a €6.2 billion surplus next year.
Donohoe said residential electricity bills would receive €600 in credits over the winter, while farms and other businesses could reclaim up to €10,000 off their monthly utility bills. The cost of these reliefs is expected to top €1 billion.
“We must weaken the ability of a shock to income becoming a loss of jobs. This policy will help employers to save their businesses,” he told lawmakers.
Income tax, the main source of state revenue for Ireland, is also running ahead of Department of Finance targets amid record-high employment. Donohoe offered relief here too, as the higher band of 40 percent — currently levied on income earned above €36,800, a low threshold by European norms — will rise next year to €40,000. This could shave €1 billion annually from revenues.
Despite the scale of the new tax cuts and reliefs, Donohoe said, state coffers retain sufficient wriggle room to start refilling an emergency “rainy day” fund that had been drained to support businesses and households through two years of pandemic lockdowns.
Donohoe said the government would immediately put €2 billion of current corporate tax receipts into that fund for this year and €4 billion in 2023.
This determination to “bank” Irish proceeds from multinationals’ Irish-booked profits “supplies our state with additional firepower to respond to the challenges of the future,” he said.