Makhlouf pushes for Irish ‘resilience fund’ amid rising corporate tax – The Irish Times


Central Bank Governor Gabriel Makhlouf on Monday urged the government to put windfall corporate tax revenues into a new so-called resilience fund, echoing recent calls from the International Monetary Fund (IMF) and the Irish Tax Advisory Board ( Ifac) according to which unsustainable income should be set aside.

Makhlouf’s opinion, in a blog post on the central bank’s website on Monday, comes as the government faces tough decisions on designing a package of measures to tackle the cost crisis. of life ahead of the 2023 budget at the end of September – and as tension mounts with public sector unions over wages.

The Central Bank recently estimated that around €8bn, or just over half, of Irish corporate tax revenue could be potentially unsustainable or ‘at risk’. Mr. Makhlouf wrote on his blog that it is important that the government does not use this revenue to finance additional permanent current expenditure, as this could drive already high inflation even higher.

“Permanent basic spending increases should be financed by permanent revenue-raising measures to avoid introducing vulnerability into public finances and reduce the risk of creating imbalances in the economy due to excess demand,” Makhlouf said.

He added that ‘unexplained’ corporate tax revenues should be placed in a ‘resilience fund’.

bad weather fund

Finance Minister Paschal Donohoe opened a so-called Rainy Days Donation in 2019 and had planned to grow it to €8 billion over time before the Covid-19 pandemic hit and the government n is using the €1.5bn fund to help the economy through a series of lockdowns.

The IMF said in a report on Ireland earlier this month that “given the uncertainty and volatile nature of [corporate income tax] income, they should be treated with caution, allocating any windfall either to the rainy day fund or to debt reduction”.

Ifac also said recently that the 2023 budget “involves a delicate balancing act to protect the economy and poorer households, while avoiding worsening inflation through second-round effects.” He said ‘overreliance on corporation tax should be reduced by contributions to the rainy days fund or a new pension reserve fund’.

Meanwhile, Mr Makhlouf said the decision last week by the governing council of the European Central Bank, of which he is a member, to raise interest rates by half a percentage point was part of of an ongoing “normalization” of monetary policy as the bank sought to rein in inflation, which stood at 8.6% last month across the eurozone.

“Our aim is to ease the inflationary pressures we see in the eurozone and achieve our medium-term inflation target of 2%,” he said. “We are fully aware of the difficulties that the current sharp price increases are causing and we are determined to ensure that the benefits of price stability for households, businesses and the economy in general materialize.”


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