Considerations for a Stronger Fiscal Framework in Ireland

Ireland’s reliance on corporate income tax (CIT) receipts from multinational enterprises (MNEs), concentrated in a small number of companies, presents significant risks to the budget. This paper proposes to strengthen the national fiscal framework by establishing a prudent medium-term debt anchor and an expenditure rule to guide the annual budget process. We first establish a prudent debt anchor for Ireland by calibrating CIT shocks and simulating possible debt trajectories. Second, we propose an operational rule based on multi-year expenditure ceilings that stabilizes debt at the anchor level while accounting for the economy’s cyclical positions.