A ‘big rush’ of corporation tax revenue into Ireland in recent years should be spent on capital projects, a leading economist has said.

Corporations contributed €23.8bn to the public purse in 2023, up €1.2bn on the year previous.

Some of this has been set aside for a ‘rainy day fund,’ which has been added to annually after it was first established in 2019.

Corporation tax

On The Pat Kenny Show last week, Colm McCarthy said large tax receipts from corporations won’t last forever.

“People will be aware we’ve had a big rush of corporation tax revenue over the last few years, much more than anyone expected,” he said.

“That has created the impression that there is a surplus, that Government spending, which has been rising rapidly, hasn’t been able to keep up with the inrush of corporation tax revenue.

“However, I don’t think anyone expects it to continue.”

An offshore windfarm in the north of England. Image: Islandstock / Alamy Stock Photo

Mr McCarthy believes it would be wise to invest this money in maintaining and constructing new capital projects for future generations.

“It’s very important to understand that in areas like transport, water, and electricity; these are all state assets we have that people kindly built a long time ago," he said.

“Queen Victoria built the railway lines around Dublin before she cleared off, which was very kind of her.

“It’s our duty in this generation to keep these things in decent nick, that’s the first item of the capital programme.”

Coastal wind energy

Mr McCarthy said a transformation to coastal wind energy has been touted as a wise capital investment for the future – but he believes it to be too costly.

“It’s true you can build offshore windfarms, which are floating; they’re very costly and much more expensive than onshore windfarms,” he said.

“You also need huge transmission lines; you can’t send electricity off in the post and you’ll have to bring it to the east coast or where the demand is.

“None of this stuff has really been persuasively costed and I think people need to take a raincheck on offshore wind.”

MetroLink

Mr McCarthy also believes the MetroLink to be too costly a project.

“Underground railways in low-density cities are the kind of project that helps to make rich countries poor,” he said.

“The best project out there in Dublin, for me anyway, is not the underground railway – it’s the bus connects project.

“Using the curb-side lanes on the roads, not for parked cars, but for busses.

“They’re talking about a couple of billion for the bus connects programme; that will be a useful thing to do.”

Some €12.8bn was budgeted for capital expenditure in Ireland for 2024.

Main image: The Google office at Grand Canal Docks in Dublin. Image: noel bennett / Alamy Stock Photo