Ireland's minister for finance outlined a "strong economic and fiscal case" for the establishment of a long-term public savings fund in a paper published May 10.
The fund would hold a portion of windfall corporation tax receipts and future budget surpluses, the paper said.
The assets would be used for two purposes: to "help to ensure that potentially windfall corporation tax receipts are not used to fund permanent expenditure increases or tax reductions," and to help alleviate any future budgetary pressures, the paper said.
The so-called scoping paper, which was published by the Ministry of Finance under Michael McGrath, finance minister, said the Irish government recorded a surplus of €8 billion ($8.8 billion), largely on the back of corporation tax receipts. It noted that the turning point for such windfalls is not predictable, and so the headline budgetary surplus is set to expand further in the coming years.
However, demographic-related pressures on public finances are building, with age-related expenditures set to be around €7 billion to €8 billion higher by the end of the decade than at the start.
Channeling excess windfall receipts and budgetary surpluses into the new fund in order to help Ireland deal with future economic pressures "would follow a well-trodden path of advanced countries establishing sovereign wealth funds in order to build fiscal buffers in good times to part pre-fund future liabilities," a news release said.
However, the paper also warned that the drawdowns from this fund would not be sufficient to cover the increase in aging-related costs by 2030, and so other reforms to the retirement system are required.
"The paper my department published today outlines some of the options available to government to help to mitigate against these risks to the public finances. Taking into account this analysis, it is my intention to bring forward proposals for a long-term savings vehicle which will be used to pre-fund part of the future costs of structural change."
A spokesman for the Ministry of Finance could not immediately be reached for comment.