An influx of taxes on corporate profits helped Ireland post its first budget surplus in a decade

Dublin (AFP) - Ireland’s government is running a surplus for the first time since the financial crisis of 2008 thanks to a surge in corporation profits tax, the prime minister announced Thursday.

“I can confirm that in 2018 we recorded a budget surplus of just over 100 million euros,” said Leo Varadkar.

“This is the first time we’ve recorded a budget surplus in a decade.”

Ireland did in fact post a surplus for last year, but that was due to “one-off” revenue from the government selling off its shares in Allied Irish Banks (AIB).

Varadkar said the surplus had been achieved 12 months early through a “very big increase” in the amount of tax raised through corporations.

Such revenue was coming in between 1-2 billion euros ($1.1-2.2 billion) ahead of projections for the year of 2018, he said.

The government hopes to carry the surplus into 2019 – but Varadkar warned that corporation profit taxes could not be taken for granted.

“We know they’re volatile, we know they relate to the profits of a small number of companies that have operations here in Ireland,” he said.

“In our budgetary plans for 2019 we’re actually projecting a fall off in tax-take from corporations.”

Ireland has one of the lowest corporate tax rates in the European Union, and has lured a considerable number of foreign firms to base their operations or European operations in the country.

An underspend in non-voted expenditure – of around 250 million euros ($285 million) – was also credited with contributing to the 2018 surplus.

“This strong performance will provide a stable platform for the external challenges that lie ahead in 2019,” said finance minister Paschal Donohoe.

The Irish economy is on tenterhooks awaiting whether Britain – its closest trading partner – will secure a Brexit deal.

Irish think tank the Economic and Social Research Institute (ESRI) has projected that Brexit will not necessarily send the Republic’s economy into a 2019 nosedive.

However it has forecast it will slow the country’s growth by nearly half – to 2.8 per cent – in the event that Britain fails to secure a divorce deal with the EU trading bloc.

In its November budget, the Irish government indicated plans to establish a 1.5 billion euro ($1.7 billion) “rainy day fund” in case Britain’s divorce from the EU sends economic shockwaves through the country.