The government has missed the opportunity to save 32 billion euros in tax money, says the Fiscal Council

“There’s potentially a huge amount of money there,” the Fiscal Council said Chairman Sebastian Barnes, ahead of the release of the council’s annual tax assessment report on Wednesday.

“If the government had introduced that five years ago, the fund would be absolutely enormous.”

The government could have saved €32 billion if “excess” corporate taxes had been set aside since 2015, the Fiscal Council estimates.

The Rainy Day fund will be boosted to €6 billion next year from excess corporate taxes, but capped at €8 billion.

The Fiscal Council called the cap “arbitrary” and advised the government to “reconsider” the design of the fund.

“Should we save this money to basically buy assets like they’re doing in Norway that we could essentially lose if the cost of pensions is higher?” Mr Barnes said.

“This option could reduce reliance on excess corporate tax revenue and save for future pension costs.”

Up to 9 billion euros – almost half of all expected corporate tax receipts this year – could be considered windfall receipts, according to the Treasury.

This means they are not justified by the underlying growth of the Irish economy and could be at risk in the future.

Without this revenue, the budget this year would show a deficit instead of a slight surplus.

A huge rise in corporate taxes since 2015 led the government this year to relaunch its Rainy Day Fund, which it renamed the National Reserve Fund.

The new pot differs from the former National Pensions Reserve Fund (NPRF), which was established in 2001 but was used up to pay for the 2009 bank bailouts.

While the government made annual contributions to this fund, the money was also used for investments.

The NPRF was incorporated into the Irish Strategic Investment Fund in 2014.

The Fiscal Council’s report says the 2023 budget has struck “a reasonable balance” between protecting budgets and avoiding higher inflation.

But it said the government will face “tough choices” going forward as it comes under pressure to fund pension costs, climate change and healthcare while reducing its reliance on volatile corporate tax revenues.

Keeping the retirement age at 66, rather than raising it to 67, will cost 2 percent of national income per year by 2050, or an additional $5 billion.

Just keeping public sector wages, pensions and benefits as they are will cost an additional 800 million euros in 2024 and 2025 above current budget projections, IFAC said, due to population growth and inflation.

“This means choices have to be made between different spending priorities and possibly tax hikes,” Mr Barnes said.

He also warned that there were “many risks” to economic forecasts that could turn out to be “overly optimistic”.

The OECD said Tuesday growth would slow sharply.