DUBLIN (Reuters) - Ireland will set aside some of its historically high corporation tax receipts for a “rainy day fund” it hopes will help shield its booming economy from any potential shocks in the future, a spokeswoman for the finance minister said on Monday.
Ireland, which is the European headquarters for some of the world’s biggest multinational companies, has seen its corporate tax swell from just under 4 billion euros (3.5 billion pounds) in 2012 to a high of 8.2 billion euros (7.2 billion pounds) last year.
The government has already collected 267 million euros or 22 percent more corporate tax than it expected so far this year.
That has made it the third biggest tax head in the overall code, representing 16 percent of all tax collected and the government now intends to use some of it to boost the new contingency reserve fund it is setting up this year.
The reserve will be funded initially by transferring 1.5 billion euros from the country’s sovereign wealth fund, the Ireland Strategic Investment Fund (ISIF), and 500 million euros a year from the exchequer for the next three years.
Finance Minister Paschal Donohoe said last month that he wants the “rainy day fund” to grow to 8 billion euros over the medium term.
“We must be careful to base spending commitments on sustainable revenue. That is why we are setting aside some of the historically high levels of corporation tax for the purpose of creating the Rainy Day Fund,” the spokeswoman said.
Donohoe will outline on Tuesday how much budgetary space he has for tax cuts and spending increases in October’s budget for 2019.
The spokeswoman said a full application of all of that space would involve the adoption of pro-cyclical policies not appropriate to Ireland’s position in the economic cycle.
Reporting by Padraic Halpin; Editing by Gareth Jones