Ireland in 2025: New Government and Economic Transition

A New Coalition Takes Power

Ireland’s 35th government was formed on 23 January 2025 following the November 2024 general election, creating a coalition government of Fianna Fáil and Fine Gael with the participation of independent TDs. Fianna Fáil leader Micheál Martin serves as Taoiseach, with Fine Gael leader Simon Harris serving as Tánaiste. On 15 January 2025, the two parties published their programme for government, which included wide-ranging commitments on health, childcare, and housing.

This political arrangement represents a continuation of Ireland’s recent centrist governance model. Ireland has accepted the political realignment in which Fianna Fáil and Fine Gael govern in coalition, Sinn Féin is the main opposition, and the party system continues to fragment. The coalition faces the challenge of addressing domestic priorities while navigating significant international uncertainties.

Corporate Tax Revenue Surge and Concentration Risks

Ireland’s economy remains heavily dependent on corporate tax revenues, particularly from US multinationals. Ireland’s corporate tax proceeds rose by over a third in November from a year earlier, with company taxes climbing to €10 billion ($11.7 billion), up by €2.7 billion from the same month last year. However, this concentration presents risks.

Ireland’s corporation tax accounts for just over a quarter of all tax receipts, with about three-quarters of those receipts paid by large U.S. multinationals. Corporation income tax is set for a strong boost of around EUR 3 billion from 2026 onwards, as Ireland’s Domestic Top-up Tax applying a minimum effective tax rate of 15% for large corporate groups is foreseen to start generating receipts.

Navigating Global Uncertainties

The new government faces significant external challenges. The vulnerability of Ireland’s public finances to international developments, such as shifting US trade and tax policies or the global tax rules, remains the key risk exacerbated by the significant concentration of revenues in few pharmaceutical and ICT companies.

Flood risk is increased due to high river levels and saturated ground, highlighting domestic climate challenges. Meanwhile, protests and attacks have marked a backlash at resettlement centers in Ireland and have spread to neighborhoods where even longtime immigrants feel unsafe, reflecting tensions around immigration policy that the government must address.

Looking Ahead

Ireland stands at a crossroads in 2025. The new coalition government must balance ambitious domestic policy goals with economic vulnerabilities stemming from over-reliance on multinational corporations. While corporate tax revenues continue to surge, experts warn about concentration risks and the sustainability of this model. The government’s ability to invest windfall revenues wisely, diversify the economy, and maintain social cohesion will determine Ireland’s prosperity in the years ahead. With global trade policies shifting and domestic pressures mounting, Ireland’s traditional economic model faces its greatest test yet.