(Bloomberg) -- Ireland has forecast a budget surplus of €8.6 billion ($9.2 billion) this year, citing anticipated record corporation tax receipts in a boost for the country that is in the process of setting up its sovereign wealth fund. 

The surplus is expected to hit €9.7 billion next year, according to the Department of Finance’s latest Stability Programme Update published Tuesday. That’s compared to the government balance showing an €8.3 billion surplus in 2023, according to statistics office figures released in April., a slight decrease on the record of €8.6 billion in 2022.

Given the surpluses, the treasury faces the challenge of deciding what to do with its excesses. There will be calls from the political opposition to start spending big now, as Ireland faces a raft of infrastructure issues including on housing, health and transport. 

However, ahead of an election that must be held by March 2025, the finance ministry will likely want to be decisive about how much it spends, and what on, in its October budget. McGrath in a speech at his Fianna Fail party’s annual conference earlier this month promised a “substantial income tax package” in the next budget for individuals and families. 

Ireland has typically heavily relied on the volatile corporate tax intake from the disproportionate number of multinational firms like Apple Inc. and Pfizer Inc. based there, which has allowed the country to establish its sovereign wealth fund to protect against future shocks. If these ‘windfall’ corporation tax receipts are excluded from the budget surplus, the economy would be facing an underlying deficit, according to the finance ministry. 

Adding to that prudence, the treasury is anticipating a slowdown in corporation tax receipts from 2026 onward, the update detailed, because of Organization for Economic Cooperation and Development reforms that impose a minimum 15% tax rate on profits. These reforms are a “key source of uncertainty,” said McGrath speaking to reporters. 

The department has forecast record high corporation tax receipts, McGrath said at the press conference, at over €24.5 billion, up from €23.8 billion last year. “But we’re not forecasting significant growth beyond that,” McGrath added to reporters in Dublin. 

“While the headline surpluses are certainly welcome, we have repeatedly pointed to the origin of those surpluses that continues to be in the form of very strong corporation tax receipts, a large share of which we regard as being windfall in nature, and cannot be relied upon into the future,” he said.

(Updates with quotes from McGrath in seventh and eight paragraphs.)

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