US agency warns Ireland's multinational tax lifeline grows thinner

Fitch warning comes amid heightened uncertainty from the US over the trade and tax policies.

Fitch said Ireland remains two notches away from a top 'AAA' rating to reflect the persistent multinational distortions and policy uncertainty.

The Irish economy has grown more reliant on just a small number of multinational companies, with corporation tax receipts from foreign firms now projected to account for nearly one-third of total tax revenue in 2025.

In a new report on the outlook for the economy, New York ratings agency Fitch affirmed Ireland's 'AA' rating and said the outlook was 'stable'.

However, Fitch warned that the reliance on tax revenues from multinationals, primarily tech and pharmaceutical companies, has risen by more than ten percentage points over the past six years. "Ireland's reliance on corporate tax revenue from MNEs has increased, with corporation tax expected to contribute 31.8% of total tax receipts in 2025, up from around 18.4% in 2019," Fitch's report states.

"Moreover, concentration is high, with the top 10 groups contributing 57% of corporation tax and the top three around 40% according to the Fiscal Council, heightening vulnerability to changes in global tax policies, US tariffs and firm-specific strategies."

The warning arrives amid heightened uncertainty from the US over the trade and tax policies. Ireland sends 33% of its goods exports to the US, with pharmaceuticals worth €44.4bn comprising 61% of that total in 2024. While tariffs on EU-origin drugs are capped at 15% under existing frameworks, and demand remains inelastic, any strategic relocation of intellectual property or production could erode high-value jobs – US firms employ roughly 8% of the Irish workforce – and shrink the tax base.

Fitch said Ireland remains two notches away from a top 'AAA' rating to reflect the persistent multinational distortions and policy uncertainty. Headline GDP, inflated by multinational profits, is forecast to grow 10% in 2025 – largely from front-loaded pharmaceutical exports ahead of potential tariffs. These profits are expected to moderate to 2.5% in 2026 and 3.5% in 2027. Modified domestic demand, a cleaner gauge, rose a more modest 3.8% in the first half of this year.

Working in Ireland's favour, the agency noted that the near-term effects from recent US tax legislation favouring domestically held intellectual property appear modest, implying limited immediate effects on the tech sector and high-value employment. "Ireland's strong fundamentals, skilled labour, stable policy and regulatory environment, and access to the EU market should also support foreign investment resilience," Fitch said.

"Nevertheless, potential strategic shifts by US MNEs, including asset relocation, could weigh on investment, services exports, the tax base and the labour market as US firms employ roughly 8% of the labour force."

Despite the concerns, Fitch affirmed Ireland’s long-term rating at ‘AA’, citing a number of strengths: the second-highest GDP per capita among rated sovereigns (even after multinational distortions), governance indicators in the 91.9th percentile globally, and public debt on track to fall below 30% of GDP by 2028. Budget surpluses averaged 1.5% of GDP from 2022–2024, and two new sovereign funds – the Future Ireland Fund and the Infrastructure, Climate and Nature Fund – are slated to hold €16.7bn by year-end.

Fitch outlined clear triggers for future rating changes. A downgrade could follow a severe external shock – such as sweeping global tax reforms or permanent multinational relocation – that durably impairs growth or revenues. They said an upgrade would require clear resilience of multinational activity to policy shifts, alongside a sustained drop in the debt-to-GNI* ratio from the current 67.1% to below 60% and reduced tax concentration.