ESRI warns of higher food prices and fragile tax base
The ESRI has warned that Ireland's tax base is becoming dangerously fragile due to an over-reliance on a small number of multinational corporations. The institute suggests the government should increase budget surpluses to mitigate risks associated with volatile windfall tax receipts.
Why it matters
This highlights the fiscal vulnerability of small, open economies that depend heavily on foreign direct investment from a few global tech and pharma giants.
Consumers face the threat of higher food prices with inflation remaining above 3% next year, according to the Economic and Social Research Institute.
With the Budget a week away, the organisation also warned the Government looks set to break its own spending limits as the Department of Health's expenditure exceeds forecasts.
The ESRI also said that multinational activity was not only propping up corporation tax but also resulted in higher income tax and VAT.
It means the dependence of the public finances on large US tech and pharma companies is broader than many economists have suggested in the past.
The ESRI said this was "compounding concerns" about the "fragility" of Ireland's tax base.
It said the concentration of highly-paid employees in foreign owned companies resulted in elevated levels of income tax to the State.
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