EU Climbs Down Over Irish Budget

by Jason Gorringe, Tax-News.com, London

25 October 2001

EU Economic Affairs Commissioner, Pedro Solbes, yesterday agreed that the Commission's criticisms of Irish budget strategy earlier this year had been overtaken by events: 'Our analysis at the beginning of the year was that the Irish economy was in an overheating situation. But now this situation has been partially corrected,' he said.

Mr Solbes climbdown came as the Commission published a report, to be presented to the next EU Finance Ministers meeting, which acknowledges that changed economic circumstances have avoided the dangers controversially highlighted last spring. The Commission cites the foot-and-mouth crisis and the world economic slowdown as external factors that have helped reduce overheating, but also claims that the Irish Government paid heed to its strictures in implementing this year's budget.

However, the Commission warns that next year's Budget could result in a rapidly shrinking surplus unless the Government exercises caution. These words were no doubt ringing in Finance Minister Charlie McCreevy's ears yesterday as he learned that the Irish Congress of Trade Unions (ICTU) is demanding tax concessions worth £846 million for the PAYE sector in the forthcoming Budget.

ICTU's proposals, contained in a pre-budget submission, are aimed at taking 80 per cent of PAYE workers out of the top tax band and ensuring that nobody on the national minimum wage is liable for income tax.

Said general secretary David Begg: 'The Government should not allow current difficulties in the global economy to deflect it from staying the course to achieve a prosperous and socially cohesive society.' He argued that further reductions in income tax, promised under the Programme for Prosperity and Fairness, could 'underpin consumer confidence' and provide a boost to the economy.

ICTU wants personal tax credits increased by £160 a year to £1,260, at a cost of £290m, a rise in PAYE tax credits of £300 to bring the figure to £700 a year, at a cost of £360m, and the standard tax band widened to £2,000 a year, costing a further £196m.

In another pre-budget submission, key public service union IMPACT has called on the Government to give the Revenue Commissioners new powers 'to track down and punish tax cheats once the November 15th deadline for the voluntary disclosure of bogus non-resident accounts expires'. The Revenue has consistently made bullish noises about the number of disclosures it is expecting; but so far only a trickle of contrite citizens has made its way to the fiscal chopping block for semi-public shriving.

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