Irish Sovereign Wealth Fund Ambitions Face Political Uncertainty

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By Padraic Halpin
DUBLIN, June 1 (Reuters) -
Plans in Ireland to create a large sovereign wealth fund from a corporate tax boom come loaded with political uncertainty, from ministers under pressure to spend more now to the potential for a policy change after elections due within two years.
The proposed fund is unique in being based chiefly on tax receipts that have jumped by more than 400% in the last decade as mainly U.S.

multinationals transferred massive amounts of intellectual property to their Irish entities.
Finance Minister Michael McGrath said ministers agreed they would save a "substantial amount" of the resulting large budget surpluses - set to hit 6.3% of national income by 2026 - but have yet to decide exactly how much they plan to set aside.
Meanwhile the finance spokesman for Sinn Fein told Reuters that, while he supported establishing a fund, the left wing party that is overwhelmingly favoured to win the next national election would prioritise increasing capital investment and decide what to save annually on a budget-by-budget basis.
The finance ministry estimates that a 142 billion euro ($156 billion) fund could be built up by 2035 if, for the next seven years, ministers invest the large portion of corporate receipts the department says cannot be relied upon to keep flowing in.
Politics will determine how much is actually invested.
"This is a once-in-a-generation opportunity," McGrath said last month as ministers prepared to decide in coming weeks how the fund should operate.
"We will not be thanked in the future if we do not take the opportunity to provide for costs that we know for sure are going to arise."
His ministry said the fund could meet as much as 82% of projected healthcare and pension costs linked to Ireland's growing and aging population by 2035 or as little as 12% under a less ambitious plan.
It also warns that the clock is ticking due to the volatile nature and concentration risk around Irish corporate tax.
Research from Ireland's fiscal watchdog on Wednesday suggested the same three companies accounted for about 33% of corporate tax revenue each year from 2017 to 2021.
"Our results imply that idiosyncratic firm- and sector-specific shocks can significantly impact the volume of Ireland's corporation tax take," the Irish Fiscal Advisory Council said.
Factors including restructurings or changes in management, tax levels, regulations, profitability or products "could all potentially have a material impact on tax revenues," it said.
SINN FEIN
With the fund likely to come into operation next year, how it is capitalised will largely come down to who wins elections due by early 2025.

Sinn Fein has had a wide lead in opinion polls for the last two years.
Its finance spokesman Pearse Doherty said that while the party would set money aside, it would also use the surpluses to fund a "catch up" programme of capital investment in areas such as housing, port infrastructure and energy security.
McGrath is also under pressure from government lawmakers to boost investment and has said he may do so where capacity was not a constraint.

Doherty said a tight labour market should not be used as an excuse to do nothing.
Doherty disagreed too with McGrath's openness to possibly paying down some of Ireland's large national debt at this point.
Doherty also said it would be very difficult to have strict rules on what portion of the surpluses should be invested and under what circumstances they could be withdrawn, meaning any rules McGrath puts into personal injury florida law (mouse click the next document) may not last very long.
"I don't believe that there should be a hard and fast rule... I think government need to make a sensible, careful approach in relation to how much money they put into this fund each year," Doherty said in an interview.

($1 = 0.9084 euros)
(Reporting by Padraic Halpin; editing by John Stonestreet)

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