RUSSIA SWITCHING OFF the supply of natural gas to Europe would present a “severe” risk to Ireland, according to Minister for Finance Paschal Donohoe.

Speaking to the budgetary oversight committee, Donohoe said the “global economic shock” caused by Russia’s invasion of Ukraine has “rapidly” changed Ireland’s economic context.

He said the potential for a withdrawal of natural gas supplies from Russia to mainland Europe is not seen as the most likely development, but it “clearly constitutes a very real risk nonetheless”.

Such an event would result in “major economic disruption in export markets” and have a “severe” effect on Ireland.

“So, in these highly uncertain times, with heightened vulnerabilities, managing the public finances in a careful and responsible way is a matter of urgency,” he said.

Discussing the summer economic statement, Donohoe said the war could cause further economic woes for Ireland.

While recognising the surge in corporation tax receipts in the last year, Donohoe said this presented an “overly benign” picture.

He said: “Much of the recovery in our public finances is due to the continuing surge in corporate tax receipts, up 53% in the year.”

Although the increase in receipts is to welcomed, he said they remain “extremely volatile”.

“To be clear, we welcome these receipts. They reflect well on Ireland as an attractive location for highly profitable multinational firms.

“But, as I warned many times, these receipts are potentially extremely volatile and can’t be guaranteed at current levels in the future.”

Donohoe said more than half of Ireland’s corporate tax yield is paid by 10 companies.

“This means that a very significant portion of our tax take is subject to business decisions and a small number of taxpayers.”

He said the government can’t repeat the mistake of using temporary revenue to finance permanent expenditure “because we know what happens when those revenues disappear”.

“I’ve therefore asked my officials to examine how much of the current corporate tax yield may be in excess above what should be expected from our economic fundamentals which we will report in advance of the budget.

“Identifying this excess will enable us to avoid basing expenditure on unreliable revenues while ensuring that Ireland remains a top tier destination for foreign direct investment.”

Speaking about gas shut off from Russia, Environment Minister Eamon Ryan said it presents a “huge problem” and that while it doesn’t directly impact Ireland, as the country does not get gas supply from Russia, it would impact gas prices. 

The gas price forwarding for next winter is beyond any historical comparison, he added.

He said it should be known in the next week or two whether the Nord Stream One pipeline will come back on, adding that an emergency meeting of EU energy ministers is due to take place at the end of the month. 

With reporting by Christina Finn