Broadening the tax base can act as counter cyclical buffer in Budget 2026

Broadening the tax base in Budget 2026 can act as a countercyclical buffer to address economic risks such as overheating, and generate more sustainable, recurring revenue sources to fund investment and address the underlying fiscal deficit.  Pursuing a budgetary strategy of broadening the tax base and prioritising expenditure measures targeted at vulnerable households most impacted by rising prices would allow Government to deliver on key programme for government commitments – running progressive budgets and broadening the tax base.

Broadening the tax base in Budget 2026

If we do not take steps now to broaden our tax base and increase recurring revenue we face the risk of a return to austerity in the event of a fiscal shock.  We must prepare for the eventual decline in unsustainable windfall revenues.  As a policy objective, Ireland can remain a low-tax economy, but it should not be incapable of adequately supporting our economic, social, and infrastructural needs. Budget 2026 should avoid relying on taxation measures to provide short term solutions. Given Ireland’s significant infrastructural and service demands, alongside a demographic shift, reductions in income taxes, indirect taxes, excise duties and levies represent poorly targeted measures and should be avoided.

Government has committed to running Budget surpluses and to funding appropriate levels of current and capital expenditure growth to meet the needs of our people and address the challenges of our growing population. If Government is serious about this commitment, clarity around ongoing resourcing is required.  We must be realistic about how much will need to be spent on our social infrastructure and services both in future and to address existing deficits.  Budget 2026 should outline a clear plan for the anticipated decline in windfall revenues in the long-term.

Social Justice Ireland’s overarching budgetary proposal is that Government set a per capita tax-take target as a first step towards planning for a sustainable tax take and developing a broad tax base. We suggest that Ireland’s overall level of taxation should reach a level equivalent to approximately €26,866 per capita in 2025 terms. This would yield an additional €28 billion.  Reaching this target would provide the recurring sustainable revenue for the state to invest in public services and improve living standards for all, reducing our exposure to a fall in unsustainable corporate tax receipts.

Policy options 

Policy options available to Government to broaden Ireland’s tax base include:

• Reforming Tax Expenditure / Tax Reliefs 

• Minimum Effective Tax Rates for Higher Earners 

• A Minimum Effective Rate of Corporation Tax 

• Increasing PRSI to strengthen the social insurance system 

• Introducing a Site Value Tax 

• Taxing Second Homes 

• Taxing Empty Houses and Underdeveloped Land 

• Taxing Windfall Gains 

• Supporting a Financial Transactions Tax 

• Continued implementation of the Carbon Tax 

Budget Choices 2026 is available to download here.