This paper is excerpted from the forthcoming “IREF’s Yearbook on Taxation” 2012
In an unprecedented and historical move, the European Union forced the Irish government against its stated wishes to indebt itself in an € 85 billion international bailout comprising of the IMF, EU and bilateral loans. This bailout to ensure that the Irish government would continue to pay 100% of face value on maturing senior bonds in zombie banks will have increased government debt by over 40% of GDP by the time the bailout is completed in 2015. Despite such catastrophic economic conditions, the Irish economy is showing signs of recovery. In 2011, Ireland generated a record high annual trade surplus of just under € 44.7 billion, up by 3% on 2010. Regarding public finances, the 2011 budget saw a closing of the deficit by a further €6 billion. Budget adjustment over the period 2011-2014 is realized for two thirds through expenditure reductions and one third should be raised by taxation. It has been called the most “draconian” budget in the history of the state.