The exchequer figures for the first quarter of the year are the classic backward-looking indicator. The trends are generally solid, but the main impact of the war in the Gulf lies ahead – and creates uncertainty for the rest of 2026.
The figures suggest, as Minister for Finance Simon Harris said, that the Government has room to respond further to rising energy costs. However, the scope for this is limited by the potential impact of the war on growth and tax revenues – as yet impossible to forecast – and Ireland’s well-rehearsed reliance on volatile corporate taxes.
First, it is worth looking at the trend so far the year. The figures show a headline exchequer deficit of spending over revenue of €200 million. However, this is affected by the early move of €1.6 billion in exchequer funds this year into two funds designed to support future spending. Excluding this, the exchequer figures are in surplus to the tune of around €1.4 billion, a bit ahead of 2025.
The second key thing to look at is the trend in tax receipts. Income tax and VAT were both strong in March – the latter probably boosted a bit by higher inflation- and both remain well ahead for the year. Income tax receipts running 6.1 per cent ahead of the first three months of 2025 – and 7.8 per cent for March alone – were particularly notable and suggest that the jobs market entered the year strongly. Corporation tax is running roughly in line with last year, but the main months for this tax lie ahead. The few companies with September year-ends, including Apple – one of the big payers – will have made payments in March which seem just slightly ahead of last year.
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It will be June before we have a clearer indication of whether corporate taxes will again run strongly ahead of budget targets and what the impact will be on the increase in the tax rate paid by big multinationals on their profits to 15 per cent, which kicks in this year.
Iran’s cyber-attacks on Irish-based companies and the ongoing impact of conflict in the Middle East
It’s a year on since Donald Trump’s Liberation Day tariffs and host Ciarán Hancock is joined in studio by Aidan Meagher, EY partner and co-head of the geopolitical strategy team; to hear about the impact this has had on Irish exporters and global trade.They also chat about the current market turmoil and an increasing level of cyber-attack on the operations of American companies in Ireland by Iranian interests.In the second half of this week’s Inside Business, Ciarán speaks to Declan Bolger, the chief executive of the Irish Life group, one of the biggest asset managers in the country.Declan gives his thoughts on the State’s new auto enrolment pension scheme, the rising costs of health insurance premiums, and the impact of AI on his sector.He also explains why Simon Harris’s plan to introduce a tax-friendly savings and investment scheme will be an “absolute failure” if only viewed for the wealthy.Produced by John Casey with JJ Vernon on sound.
And the third key issue is the trend in spending, which is running 6.4 per cent ahead of 2025, driven by the rising cost of public services and higher State investment. With spending already rising well ahead of inflation, the pressures on permanent spending do limit the scope for further increases to compensate households and businesses for cost-of-living rises. Otherwise the Government will bust through its limit of 6 per cent for spending growth this year. Nonetheless, the demands look set to grow in the short term.
This push and pull between relatively strong exchequer figures and demands for higher spending look set to dominate the political agenda in the months ahead. The State should be on course for another annual surplus and has substantial cash reserves. But ministers have also heard the repeated warnings from the Fiscal Advisory Council about the underlying trends in the public finances and Ireland’s increasing reliance on potentially volatile corporate taxes. Tricky decisions for ministers lie ahead.
