## Options for Strengthening Ireland’s Fiscal Framework

_IMF Working Papers, July 25, 2025_

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**Canonical URL:** [Options for Strengthening Ireland’s Fiscal Framework](https://www.imf.org/en/publications/wp/issues/2025/07/25/options-for-strengthening-irelands-fiscal-framework-569017)

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## Bibliographic details
- Authors: Rossen Rozenov, Waikei R Lam, Yang Yang, Yinjie Yu
- Published: July 25, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229018647.001

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### Executive summary
- Ireland’s reliance on corporate income tax (CIT) receipts from multinational enterprises, concentrated in a small number of companies, presents significant risks to the budget.
- The uncertain nature of this revenue calls for a robust fiscal framework to safeguard public finances.
- The paper proposes establishing a prudent medium-term debt anchor and an expenditure rule to guide the annual budget process.
- Methodological approach: calibrate CIT shocks, simulate possible debt trajectories, and design operational multi-year expenditure ceilings calibrated to stabilize debt while accounting for the economy’s cyclical position.
- Although tailored to Ireland, the methodology has broader applicability for designing effective fiscal rules.

### Major findings and diagnostics
- Fiscal risk source:
  - Corporate income tax (CIT) receipts from multinational enterprises are the principal source of vulnerability.
  - Revenue concentration: CIT receipts are concentrated in a small number of companies.
- Implication:
  - The uncertain and volatile nature of CIT revenue increases downside risks to debt sustainability and fiscal plans.
- Diagnostic approach:
  - Calibrate CIT shocks and simulate possible debt trajectories to establish a prudent debt anchor.

### Policy proposals and operational design
- Prudent medium-term debt anchor:
  - Establish a debt anchor based on calibrated CIT shocks and simulated debt trajectories to reflect Ireland’s exposure to concentrated CIT volatility.
- Expenditure rule:
  - Introduce an expenditure rule implemented through multi-year expenditure ceilings.
  - Ceilings are calibrated to stabilize debt at the anchor level while accounting for the economy’s cyclical position.
- Operationalization:
  - Use the expenditure ceilings as the guiding constraint for the annual budget process to translate the medium-term anchor into yearly policy.

### Methodology and applicability
- Methodological steps:
  - Calibrate shocks to CIT revenues.
  - Simulate multiple debt trajectories under those shocks.
  - Determine a prudent debt anchor consistent with simulated outcomes.
  - Derive multi-year expenditure ceilings that stabilize debt at the anchor, conditional on cyclical position.
- Applicability:
  - Although the proposals are tailored to Ireland, the methodology is presented as broadly applicable for designing effective fiscal rules in other jurisdictions facing concentrated revenue risks.

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_Source: https://www.imf.org/en/publications/wp/issues/2025/07/25/options-for-strengthening-irelands-fiscal-framework-569017_