Speech by Minister for Finance Paschal Donohoe to the Irish Tax Institute’s Annual Dinner 2025

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Good evening everybody.

It is my great pleasure to join you here tonight and I would like to thank Aoife Lavan and Martin Lambe for the invitation to address you all.

It has been five years since I last spoke to you as Minister for Finance, and it is truly remarkable to consider what has happened since then.

In 2020, Brexit was considered to be a once in a generation economic and political challenge. However, in the last few years, we have confronted a series of challenges - the COVID pandemic, Russia’s aggression against Ukraine, and of course the continuing and existential risk of climate change.

We are witnessing a great geopoliticial shift as protectionist policies now threaten to turn globalisation, which has served Ireland so well, to deglobalisation that could damage economic prosperity both at home and across the world.

I had the honour this week to attend the meeting of the G7 and G20 Finance Ministers and Central Bank Governors in Cape Town, just returning this afternoon. The challenges and opportunities which face both me as a politician and you as business leaders, were evident during my time in South Africa, most notably the uncertain geo-political backdrop that we all face.

Of course, you all know from first-hand experience just how challenging the business environment can become in a shock-prone world. Nevertheless, your persistence and tireless efforts have supported the economy of Ireland through the recent turbulent times and we are in a relatively strong position as a result.

The resilient nature of the Irish economy has been most clearly evident in the labour market.

There are now 2.8 million people in employment – equivalent to three-quarters of the working age population; this figure has never been higher and is a key factor behind the continuing improvements in our nation’s living standards. The unemployment rate is now just 4.0 per cent, its lowest level in more than two decades.

Encouragingly, the inflationary pressures which we saw across 2022 and 2023 have eased significantly over the last year or so. Inflation in February stood at 1.3%, one of the lowest rates of inflation amongst euro area countries. The reduction in inflation from the almost double digit figures of a few years ago shows that our policies both here at home and in Europe have worked.

Critically, our public finances are healthy. We continue to run budget surpluses and our debt as a share of national income has significantly reduced in recent years.

Due to your efforts and making the right political choices, we stand in a good place.

I am very conscious that people want and expect us to do more. Despite making some progress, the supply of homes in this country is still a huge challenge, we want to do more on building sustainable communities, on supporting those with a disability and protecting the most vulnerable. But we cannot achieve of this without healthy public finances.

I have said many times that my political outlook was forged in the aftermath of the Global Financial Crisis, and at the heart of that outlook is the need to have strong and secure public finances. All of my efforts in Government have been to protect those finances, to reduce debt and run budget surpluses while at the same time investing in essential public services to support a growing and changing population.

This government will continue to build up our resilience through transfers to the Future Ireland Fund and the Infrastructure Climate and Nature Fund, which were established by my colleague Minister Chambers last year. Sixteen billion euro will be invested in the two funds by the end of this year. By committing to put money aside this year and the years to come, we can address issues such as ageing, climate and the digital transition and help to ensure that the burden of these future costs will be manageable.

I am confident that this approach will put Ireland and the Irish people in the strongest possible position to meet future challenges and to make the most of the opportunities.

Managing these risks is, of course, a top priority for the new government. We must keep our public finances safe but also invest in our future.

In particular, we need to continue to invest in the necessary infrastructure in key strategic areas, such as energy, water, housing and transport, to ensure that we are protecting the competiveness of our economy and meeting the needs of our people.

We must also continue to invest in our people, ensuring they have the skills and knowledge needed to meet the demands of the modern workplace, and equipping workers to embrace the positives of digitisation.

However, the foundation underpinning our response to these global challenges is our membership of a strong and united European Union.

Over fifty years of EU membership have brought many benefits to Ireland and to the wider continent, not least decades of peace and progress. Ireland will continue to play our part to work with our European neighbours to deliver on the ambitions and values of the European Project.

In less than eighteen months’ time, we will assume the Presidency of the EU and will use our Presidency to lead the European agenda and deliver for citizens across the continent.

This is because our strongest national response to these global challenges is a stronger Europe.

When we were negotiating the new Programme for Government, my political colleagues and I were very conscious of the global backdrop. The title of the Programme, Securing Ireland’s Future, reflects the priority of this government.

The Programme for Government sets out our commitments for tax policy - the maintenance of a broad tax base while implementing progressive changes in taxation if the economy allows, supporting innovation and entrepreneurship and maintaining the competitiveness of our businesses large and small.

This will be my over-arching approach but in each Budget, choices and trade-offs will have to be made. We can’t do everything and I won’t promise that we can but we are committed to doing what we can to support businesses and workers.

Those choices and trade-offs will be made within the framework of our Medium-Term Fiscal Plan which Minister Jack Chambers and I will work together to develop across the coming months. This document, which we will submit to the European Commission, will set out our expenditure and taxation framework over the term of this government.

We will continue to play to our traditional strengths, including maintaining a forward-looking business environment, a whole-of-government approach to ensuring we remain agile and competitive, and importantly, recognising the value of an educated and dynamic workforce who have consistently delivered innovation and profitability over many decades for global businesses.

The maintenance of competitiveness will be a key focus for the government, that competitiveness focus will also be a priority across the EU. The Draghi report on EU competitiveness is an important step on this journey of reform, setting out a strategy to enhance innovation across the continent.

Complexity within the tax system, while often driven by EU and international commitments, has led to growing calls for simplification – something which I am committed to pursuing.

Through our engagements at all levels we have made it clear that we see simplification as a unique opportunity for the EU to look holistically at the existing tax rules in a broad and open way with a view to enhancing EU competitiveness. We must maintain a stable and robust tax framework that is both easier to navigate and easier to administer.

We have already embarked on a simplification process domestically which includes:

• the introduction of a participation exemption for foreign dividends;
• the carrying out of a review of the tax treatment of interest in Ireland – in respect of which a public consultation recently concluded; and
• a review of the R&D Tax Credit to ensure that it remains an important part of our competitive offering

Other developments continue in the international space beyond the simplification process, DAC9, which will provide a framework for sharing of Pillar Two information throughout the EU, is close to agreement; the OECD continue to work to develop new administrative guidance to ensure that the minimum tax rules function as intended.

This is not without its own challenges and we remain fully engaged to ensure that Ireland’s voice is heard and we remain an attractive place for business to invest and grow.

Consultation will remain a cornerstone of policy development and I thank all of you who have engaged with the department’s consultations over the past number of years, and I encourage you to continue to do so as your insights are critical to help us achieve our shared goals.

External consultation was a key step in the path to the historic decision I made in October 2021, that Ireland would sign up to the OECD global tax deal.

I have always believed that economic benefits accrue from closer integration between countries, a shared idea when realised can deliver more jobs, rising incomes and growth for all through a removal of barriers and an increase in trade.

The development of a new framework to address the tax challenges arising from the digitalisation of the economy was intended to deliver such positive outcomes.

I signed up to this agreement on the basis it was a pragmatic and sensible approach to address global uncertainty and provide the positive conditions and long term certainty for businesses and investors to prosper and grow. The implementation of this agreement globally is critical to achieve those aims.

Irish officials continue to examine President Trump’s Memorandum on the OECD Global Tax Deal and the potential retaliatory measures that have been announced. While we regret the position adopted we do recognise the significance of the concerns raised and the commitment to engagement over the coming months.

I am very conscious that the current situation creates huge uncertainty for all stakeholders and is precisely the opposite of what was intended when we reached political agreement on these rules in 2021. Cooperation through the OECD is critical to bring stability to the international tax environment and we all should all be alive to the risk of significant and far reaching global disputes that could emerge should the impasse not be resolved.

I am still firmly of the view that global agreement on a fairer mechanism to address the taxation of the digital economy remains the best approach and remains preferable to a proliferation of uncoordinated unilateral measures and the disputes that would inevitably arise from them. It is incumbent on all of us to explore opportunities to resolve these issues.

All parties must engage constructively over the coming months to examine mutually beneficial solutions. As I did in South Africa this week, I will continue to lend my support to such an approach through engagements with the EU, OECD and G20.

I hope that businesses and others recognise the importance of achieving a stable outcome through these negotiations and I hope that through your engagements with international colleagues and clients that you emphasise the importance of protecting the fragile progress that exists.

Because let’s be clear, the absence of a global tax deal increases uncertainty, reduces profitability and impacts economic growth for everyone.

The Irish Government is absolutely committed to the principles of free trade, which have underpinned our sustained economic success. Free trade brings economic opportunities, creates well-paid jobs, fosters innovation and builds economic resilience, within a strong, rules-based international trading system.

Ireland and the US have a significant and mutually beneficial economic relationship which has had commitments to free trade at its core. Our trade and investment relationship is worth €1 trillion annually. Ireland is now the 6th largest source of foreign direct investment into the US, with investment by Irish companies in 2023 worth $351 billion.

I look forward to working constructively with the US administration and continuing the deep and strong bilateral relations between our two nations that have existed for so long now.

As I finish up, I want to assure you all, that while the world is changing before us and the challenges we are facing are becoming more frequent, I will always make the case for continued optimism and progress. Look at the challenges we – you - have overcome in recent years. That is the cause for optimism, our current resilience, our recent achievements.

But optimism is not the same as wishing our problems away, it is not the same as denying the scale of our challenges.

The challenges Ireland and Europe confront are immense, potentially historic. But with will, with work, and with the right decisions, we can yet be the match for them.

I mentioned at the outset that I was in South Africa this week and it was Nelson Mandela who said ‘Part of being optimistic is keeping one’s head pointed toward the sun, one’s feet moving forward.’

You have all played your part in our economic success and resilience over the last decade and for that I thank you. Let’s go to work, again.

Thank you also for the opportunity to speak with you and I hope you enjoy the rest of your evening.