ESRI Urges More Borrowing Rather Than Tax Hikes

by Jason Gorringe, Tax-News.com, London

11 November 2002

In its latest quarterly economic commentary, released on Friday, the Economic and Social Reasearch Institute (ESRI) urged Irish Finance Minister, Charlie McCreevy to borrow more money in his forthcoming budget, rather than introduce large tax hikes or cuts in government spending.

In its report, the Institute takes the view that the economic slowdown in Ireland is a temporary phenomenon, but that tax revenue growth for the remainder of the year and into 2003 will remain relatively limited, increasing the pressure on public finances still further.

However, according to the ESRI, the most important task ahead of Mr McCreevy is to 'consolidate the public finances by bringing expenditure growth under control'.

The Irish social research body also asked the Finance Minister to refrain from making any new structural changes to the Republic's tax system, arguing that:

'The difficulties in forecasting government revenues arising from factors other than uncertainty about economic growth have increased in recent years, a reflection of both substantial tax rate changes and significant administrative changes undertaken.'

'In this regard it may be appropriate to allow time to analyse the economic impact of the modifications already in train before further substantial budgetary changes are undertaken.'

The Institute went on to suggest that the government introduce a neutral budget in December, indexing tax credits and bands and welfare payments to inflation. Such a move would cost the Exchequer 1 billion euros next year, according to its quarterly report.

Recommended