IMF Working Papers

Options for Strengthening Ireland’s Fiscal Framework

By Rossen Rozenov, Waikei R Lam, Yang Yang, Yinjie Yu

July 25, 2025

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Format: Chicago

Rossen Rozenov, Waikei R Lam, Yang Yang, and Yinjie Yu. "Options for Strengthening Ireland’s Fiscal Framework", IMF Working Papers 2025, 149 (2025), accessed July 31, 2025, https://doi.org/10.5089/9798229018647.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Ireland’s reliance on corporate income tax (CIT) receipts from multinational enterprises, concentrated in a small number of companies, presents significant risks to the budget. The uncertain nature of this revenue calls for a robust fiscal framework to safeguard public finances. This paper proposes strengthening 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. The ceilings are calibrated such as to stabilize debt at the anchor level while accounting for the economy’s cyclical position. Although tailored to Ireland, the methodology employed has broader applicability for designing effective fiscal rules.

Subject: Balance of payments, Corporate income tax, Expenditure, Fiscal governance, Fiscal policy, Fiscal rules, Fiscal stance, Foreign direct investment, Labor, Public debt, Taxes, Unemployment

Keywords: Corporate income tax, Debt Anchor, Expenditure Ceilings, Fiscal Framework, Fiscal governance, Fiscal Reaction Function, Fiscal rules, Fiscal stance, Foreign direct investment, Unemployment

Publication Details

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