The European Commission on Thursday warned that the sustainability of Ireland’s corporate tax revenue was one of the main risks to the country’s fiscal outlook.
In 2017, Ireland collected a record €51bn (£44bn) in taxes, but the country is increasingly reliant on taxes paid by a few large multinational companies. Corporate taxes comprised some 16% of €51bn.
The commission also pointed to over-spending within the country’s health sector. In its recently announced budget, the Irish government committed to spending an additional €1bn on health in 2019.
The warning came as the commission upgraded forecasts for Irish economic growth on Thursday, even as it downgraded its overall forecasts for the 19-member eurozone. The country’s GDP will grow by 7.8% in 2018, and 4.5% in 2019, it said. The commission had previously predicted 5.6% growth in 2018 and 4% in 2019.
ECB warns Ireland to ‘rebuild fiscal buffers’
Meanwhile, ECB chief Mario Draghi told Irish lawmakers that Ireland should “rebuild its fiscal buffers” to ensure that it is prepared for future risks.
“Build fiscal buffers, rebuild fiscal buffers … because things are going well, so it’s the right time to do so,” Draghi said.
He also warned Ireland to prepare for all Brexit outcomes, including a no-deal scenario. “While the direct trade effects of a hard Brexit would be limited for the euro area as a whole, Ireland is more exposed due to its very close trade relations with the United Kingdom,” he said.
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