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Ireland's political and cultural magazine
October-November 2025 23
Drudget 2025
Don’t expect vision on budget day
If the Greens were still at the cabinet table…
You would not be hearing pledges to splash
cash on a broad hospitality VAT cut. The party
line – pace an occasional tourism minister –
has favoured restoring the tax base rather than
subsidising restaurant margins. Éamon Ryan
was “absolutely certain” the 9% would end; in
a Green-coloured budget the 13.5% rate would
have stayed and any relief would have been
tightly targeted.
You’d also have seen bigger, earlier retrofit
funding (grants and cheap-loan schemes)
badged as the cost-of-living lever that actually
reduces bills, plus a smaller appetite for broad-
brush energy credits. So what will Paschal
Donohoe actually do?
In one of the tightest budgets in years
Donohoe will thread the SES needle: modest
indexation of tax bands/credits; no great USC
theatrics (the 2025 cut is already operative);
PRSI up 0.1% as scheduled; a Rent Credit
extension pitched as “temporary and
targeted”; no silly, regressively universal
energy credits; and hospitality-VAT reduction
either delayed, pared back, or swapped for a
cheaper sop. Then he points at the funds and
the corporation-tax roulette wheel and reminds
everyone why permanent giveaways buy
tomorrow’s hole: Remember. It’s boring
because he’s trying to keep it safe.
If you wanted revolution, you should have
voted for dierent electoral arithmetic, perhaps
you did. Anyway, this one is fiscal rain-mac
pragmatism: a little give to households so the
headlines behave, a quiet take via PRSI so the
actuarial tables and the Business Post do, and
constant genuflection to the gods of
multinational profits because that’s all you
know. When nearly a third of your tax base sits
on someone else’s balance sheet, in Ireland
you must always budget like a person who
knows where the exits are.
By Suzie Mélange
Paschal Donohoe is the Minister for
Finance again (since 23 January
2025) and he’ll deliver Budget
2026 on 7 October 2025. The
Summer Economic Statement fixes
a €9.4bn package: €7.9bn extra spending and
€1.5bn in tax measures. That envelope is not a
vibe; it’s policy. So expect austerity faces from
government, and no pole-dancing.
On personal taxes, most of the easy sugar
was already handed out in last year’s budget
when the finances were rosier: the USC middle
rate was cut from 4% to 3% from 1 January
2025, and the 3% band widened to €27,382 to
prevent minimum-wage workers being
dragged up a rate. The single 20% income-tax
band moved to €44,000. Expect a minor
€1500 increase in the rate at which people
enter the higher 40 per cent income tax rate.
He can tweak bands again in October. Welfare
increases may be €8 weekly across the board
which is ungenerous, especially for pensions.
There is a big row about rectuitment of 3000
new school teachers. Minister for Public
Expenditure Jack Chambers is shouting for
“value for money”.
Where the State will quietly take a little back
is PRSI. The Roadmap has all classes up by 0.1
percentage points on 1 October 2025, the
second step in a multi-year series to fund the
Social Insurance Fund and keep the pension
age at 66 (for now). It’s a tax rise wearing a
sensible tie.
On “sin and green” taxation: the carbon tax
escalator is hard-coded in law — annual steps
to €100/tCO₂ by 2030. It is €63.50/t today; the
pattern is October increases for petrol/diesel
and May for other fuels. You can expect the
next nudge, because the legislation says so. If
ministers decide, for decency’s sake, they need
to look “tough on climate”, they’ll just
re-announce the thing that’s already set in
legislative concrete.
Housing optics are irresistible. It’s mooted
that VAT will come down on apartments. The
Rent Tax Credit sits at €1,000 per adult for
2024 and 2025, but, crucially, it expires after
2025 unless extended. Extending or
“targeting” it is the cheap way to look busy on
housing while avoiding structural choices and
above all a move to more public housing which
would frighten the FFG horses. Mortgage-
interest-relief re-runs are always on lobbyists’
wishlists but suer the usual drawbacks.
Cutting VAT to 9% across hospitality and
hairdressers has been bandied about but
could cost about €868m; limiting it to food
businesses only still burns around €550m. And
the public senses hotels are in gravy. Expect FF
to blame entrepreneur-friendly FG for the
hospitality fetish.
Meanwhile, Paschal will hymn “prudence”
and point at the sovereign piggy banks. The
Future Ireland Fund and the Infrastructure,
Climate and Nature Fund (ICNF) exist to park
windfall corporate taxes; the ICNF gets €2bn a
year to 2030. It’s good housekeeping in a PVC
one-o with leaky windows.
The corporation-tax elephant
The FT has meanly drawn attention to
Ireland’s precariousness and we all know
tariffs and Trumpian pharma focus are
Damoclean. Corporation tax was €28bn in
2024 and around 29% of all tax, a level IFAC
calls a phenomenal surplus generator – and a
risk. A handful of firms drive an outsized chunk
of it. IFAC estimates three firms produced
c.38% of receipts in 2023. August reminded
everyone who’s boss: monthly receipts fell
43% year-on-year to €2.1bn, dragging growth
down – but overall tax to end-August is still up
7.3% (4.4% excluding the one-o Apple/CJEU).
Expect repeated sermons about not hard-
wiring windfalls into permanent spend but no
vision of how to channel the longterm fiscal
Zeitgeist into a legacy.
Government will tweak
income-tax bands again
in October, but don’t
expect pole-dancing and
it will quietly take a little
back is PRSI
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