Government urged to publish plan to broaden Ireland’s tax base ahead of Budget 2027

The Budgetary Oversight Committee has made 15 recommendations covering taxation, spending, fiscal rules and long-term financial planning

The report examines the Government’s proposed Budget 2027 package of €8.5bn. File photo: iStock

The Government has been called on to publish a medium-term plan for broadening the tax base ahead of next week’s Budget.

The Budgetary Oversight Committee’s pre-Budget 2027 report, which makes 15 recommendations to Government, warns that fiscal policy must avoid adding to inflationary pressures, repeated spending overruns undermine transparency, and Ireland’s reliance on concentrated corporation tax receipts creates serious risks for the public finances.

Members also believe Government departments should publish annual and multi-annual expenditure projections based on demographic pressures and pay demands.

The report examines the Government’s proposed Budget 2027 package of €8.5bn, comprising €1.5bn in permanent new tax measures and €7bn in additional public spending.

It calls for a broader tax base, a credible domestic fiscal rule and more multi-annual budgeting.

Calls for broader tax base

Committee chair Richard O’Donoghue, said: “The committee believes budget 2027 should seek to provide meaningful support to those most affected by persistent energy and fuel costs. While maintaining prudent fiscal management must remain a priority, the Government should also ensure that the benefits of economic growth are used to support workers, families and businesses facing genuine financial pressures.”

The report recommends that a “credible domestic fiscal rule” be published to limit net spending to a sustainable growth rate over the medium to long term.

It also states that contributions to the Future Ireland Fund and Infrastructure, Climate and Nature Fund should come from genuine fiscal surpluses rather than borrowing.

Other recommendations include:

• The establishment of a rules-based framework for the regular indexation of income tax bands and credits, and core social welfare payments;
• giving the Irish Fiscal Advisory Council a statutory right to obtain timely and granular public expenditure information; and 
• consideration of moving from annual budgeting towards a multi-year budgeting process.

Concerns over corporation tax

The report notes the strong performance of the Irish economy but warns that Ireland’s corporation tax base has become increasingly concentrated.

It says current spending should not become dependent on receipts that may be transitory or vulnerable to external shocks.

In compiling the report, the committee held a series of engagements with the Irish Fiscal Advisory Council, the Central Bank of Ireland, the Economic and Social Research Institute, the Nevin Economic Research Institute and Social Justice Ireland.