Ireland is planning to establish a public investment fund to help sustain capital spending if the economy hits a “sharp” downturn, according to the country’s budget chief.
(Bloomberg) — Ireland is planning to establish a public investment fund to help sustain capital spending if the economy hits a “sharp” downturn, according to the country’s budget chief.
Finance Minister Michael McGrath said the new mechanism, which is being set up in parallel with a sovereign wealth fund, is meant to “smooth” public investment levels and allow the government to “invest through the cycle” of the economy.
No decisions on the size of the fund have been made but McGrath hopes to bring a proposal to fellow ministers in the coming weeks for approval, he told reporters Tuesday at the Department of Finance’s annual policy conference in Dublin.
Further details are likely to be contained in the country’s annual budget in October, while it may take as long as a year to pass the legislation underpinning the funds, he added.
McGrath announced the new sovereign wealth fund earlier this year to help cover future costs such as an aging population. It will be capitalized by a surge in corporation tax receipts that’s widened the country’s budget surplus in recent years but may not last.
The ministry has said the fund will receive at least €34 billion ($37.4 billion) by 2030, with lawmakers deciding over the coming months how much to save each year.
A minimum annual contribution of €4 billion and a maximum of €12 billion will be made and Irish Prime Minister Leo Varadkar last month said he would like to see them “at the upper end of the scale.”
Ireland has estimated it could collect €24 billion in corporation tax this year, of which €12 billion could be “windfall” receipts unlikely to be sustained over the long term. Tax revenue from companies may rise to around €27 billion by 2026, the finance ministry projects.
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