John Connolly (Galway West, Fianna Fail)
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67. To ask the Minister for Finance in the context of the considerations of the ESRI that a potential change in the taxation policy of the United States could adversely affect Irish corporation tax receipts, the action he is taking to mitigate the possible impact of such a change; and if he will make a statement on the matter. [16244/25]

Paul Murphy (Dublin South West, Solidarity)
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69. To ask the Minister for Finance the steps he plans to take to compensate for potential reductions in Government revenues as a result of US tariffs; and if he will make a statement on the matter. [16152/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 67 and 69 together.

My Department and the ESRI recently published an analytical paper which included the modelling of potential tariff scenarios and the impacts on the Irish economy. The analysis focuses on the impact of tariffs and does not estimate the impact of certain broader protectionist measures, including potential changes to the US tax code. While the latter could have a material impact on the Irish economy, it is difficult to model given inter alia the important role of firm-specific factors, as well as the lack of certainty at the current juncture.

The analysis shows that Modified Domestic Demand – the most meaningful metric for the Irish economy – would be between 1-2 per cent below its no-tariff baseline level over the medium-term depending on the extent of tariffs.

The potential impact on GDP is larger, estimated at around 2½ to almost 4 per cent below a no-tariff baseline, although changes in GDP have less of an impact ‘on the ground’. The slowdown in domestic growth would be accompanied by lower-than-assumed employment growth, which is expected to be around 2 to 3 per cent lower compared to a no-tariff baseline.

Importantly, the paper does not account for changes to the firm- and sector-specific factors that have produced ‘windfall’ corporation tax receipts in recent years. As a result, the main focus of the paper is on estimating the impact on the economy rather than the public finances.

Given the scale of the increase in corporation tax receipts in recent years, and the concentration of receipts, it is important to ‘stress test’ the public finances to understand the potential implications of a reversal of these flows.

My Department published a number of general corporation tax scenarios in the Medium-term Fiscal and Structural Plan in October 2024 to illustrate the potential impact on the public finances. For example, if corporation tax receipts were to flatline at 2024 levels this would lower the General Government Surplus by almost €8 billion over the medium-term relative to the Budget 2025 baseline projections. In a more severe scenario where corporation tax receipts reverted to 2020 levels by 2030, all else equal, this would lead to a deficit of almost €15 billion by the end of this decade.

There has been significant progress made in recent years in mitigating the risks around corporation tax. Indeed, the Future Ireland Fund and Infrastructure, Climate and Nature Fund both enable Government to prepare for future fiscal challenges and, at the same time, remove a large portion of ‘windfall’ receipts from the day-to-day expenditure base. Ultimately, the best way to mitigate the risk of an over-reliance on potentially transient windfall revenues is to keep public expenditure growth at sustainable levels, which will be achieved by following the appropriate budgetary strategy.