EU Leaders Target Ireland's Corporate Tax for New Budget

European Council President António Costa is preparing to divert a share of Ireland’s corporate tax revenue into the central European Union budget. This move aims to fund the EU’s multiannual financial framework for 2028 to 2034, a package currently stalled by disagreements among member states. The proposal places Ireland, the EU’s largest recipient of multinational corporate taxes, at the center of a new diplomatic struggle.

The European Commission originally proposed an 8 percent cut to the initial 1.76 trillion euro budget. Irish Prime Minister Micheál Martin called that proposal an attempt to reconcile the irreconcilable. Costa now seeks new sources of own resources, money that goes directly to Brussels rather than coming from national contributions. He faces pressure from northern countries that want to pay less and from eastern and southern states that want to protect agricultural and cohesion funding.

The focus of Costa’s search is the revenue generated by the 2021 OECD corporate tax reform. This agreement established a 15 percent minimum tax rate for large multinationals. Ireland currently applies its standard 12.5 percent rate plus an additional 2.5 percent surcharge on these companies. The Fiscal Council estimates this extra charge will yield 5 billion euros in 2025, which equals 13 percent of total expected corporate tax revenue for the year.

Sources in Dublin confirm that Costa’s team has floated the idea of diverting this specific 2.5 percent surcharge to the EU pot. While no firm proposal has been tabled yet, strong support from France makes it likely to emerge in the coming weeks. The matter may be raised at an informal summit of EU leaders in Dublin next week, ahead of a decisive meeting in Brussels at the end of the month.

Former OECD tax head Pascal Saint-Amans noted to Politico that the new plan recognizes multinational activity in Ireland as a way to manage business in EU markets. This perspective supports the logic of redistributing the tax, effectively replicating the part of the 2021 OECD plan that was meant to shift taxing rights away from headquarters countries but never came into force.

Ireland has previously resisted efforts to pool corporate tax revenues, such as the common consolidated corporate tax base proposal that was withdrawn in 2023. Tax remains a national competence, and the EU budget requires the agreement of all 27 member states. However, the sheer size of Ireland’s recent tax receipts has drawn increased international attention. The US Congress may also probe how American companies pay taxes here, adding another layer of scrutiny to the Irish exchequer.