Minister for Finance Paschal Donohoe will be able to announce his €9.4 billion budget package on Tuesday and still aim for a significant surplus of revenue over spending in 2026.
Strong growth in corporate and income taxes are again expected to underpin the public finances, according to pre-budget figures published on Saturday.
They show that before any budget measures are announced, tax revenues are expected to grow by around 3.25 per cent in 2026, with faster growth in corporate and income taxes. The corporate tax take is forecast to rise by another €2 billion next year to €34.1 billion.
While Mr Donohoe has said he expected the tax to top out at some stage, it is predicted to rise next year partly because under the Organisation for Economic Co-operation and Development (OECD) tax deal the rate on big companies is increasing to 15 per cent from 12.5 per cent.
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While the future of the OECD deal is now uncertain, this increase is nonetheless expected to remain bar a decision at European Union level to the contrary. Meanwhile, another part of the OECD agreement which would hit Irish corporate tax receipts looks increasingly unlikely to ever be implemented.
Income tax receipts are also expected to rise from €36.5 billion this year to just over €39 billion next year. While budget day measures normally reduce the figure forecast in the White Paper, the absence of a significant personal tax package this year means the figure may not change markedly on budget day.
It will be the first budget of recent years without significant changes to income tax bands and credits. Instead, the €1.5 billion tax package is likely to focus on VAT reductions aimed at the hospitality sector and possibly at construction.
The White Paper is compiled on what is called a “pre-budget” basis – in other words it excludes measures announced on budget day. However, it counts in measures already announced such as the increase in state investment signalled in the revised National Development Plan and cash to maintain service levels last year.
It forecasts an €8.8 billion surplus for 2026. This is likely to fall a bit on budget day, but it is expected that a healthy budget surplus target to still be set for 2026.
This will provide the exchequer with some leeway if tax revenues disappoint or if spending rises faster than target as has happened in every recent year.
Exchequer returns for September published on Friday showed a 4.5 per cent rise in underlying tax revenues – excluding the Apple tax money – but income tax after nine months, while ahead of last year, is slightly below expectations.
