Considerations for a Stronger Fiscal Framework in Ireland

Selected Issues Papers, July 7, 2025

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Ireland’s reliance on corporate income tax (CIT) receipts from multinational enterprises (MNEs), concentrated in a small number of companies, presents significant risks to the budget.
The paper proposes strengthening the national fiscal framework by:
- establishing a prudent medium-term debt anchor; and
- introducing an expenditure rule to guide the annual budget process.
The operational approach aims to stabilize debt at the anchor level while accounting for the economy’s cyclical positions.

Calibrate CIT shocks and simulate possible debt trajectories to establish a prudent debt anchor.
Design an operational rule based on multi-year expenditure ceilings that:
- stabilizes debt at the anchor level; and
- accounts for cyclical positions of the economy.
Key terminology used: CIT shock, Corporate income tax, Debt Anchor, debt fan, debt trajectory, Expenditure Rule, Fiscal governance, Fiscal Rule, Fiscal rules, Fiscal stance.

Establish a prudent medium-term debt anchor for Ireland informed by calibrated CIT shocks and debt trajectory simulations.
Implement multi-year expenditure ceilings as an operational expenditure rule to:
- guide the annual budget process; and
- stabilize debt at the chosen anchor while incorporating cyclical adjustments.

Source: Considerations for a Stronger Fiscal Framework in Ireland (Selected Issues Papers), July 7, 2025.