Ireland Could Face Borrowing Crisis Due To Revenue Shortfalls

by Jason Gorringe, Tax-News.com, London

18 February 2002

Davy Stockbrokers in Ireland has warned that the country could join Germany and Portugal in the European Union's bad books over Government borrowing in 2003.

In its weekly market review last week, the organisation predicted that borrowing this year could overshoot targets announced by Finance Minister Charlie McCreevy by as much as Euro 1 billion, and could conceivably top Euro 3 billion next year.

Economic analyst at Davy, Robbie Keller, explained on Thursday that the gloomy predictions had been made on the basis of revenue shortfalls and increased Government spending:

'We could easily end up with a deficit of Euro 1 billion this year because of the spending overruns and tax revenue shortfalls,' he revealed, adding that: 'If you strip out the cost of last year's income tax cuts, the [Finance] Minister is looking for underlying revenue growth of 10% plus. But there could be further slippage on excise and we have doubts about corporation tax. A lot of the firms which paid large amounts of corporation tax have had a bad year, so how much tax will they owe this year?'

Fine Gael Finance Spokesman Jim Mitchell said in the Dail on Thursday that January Government revenue and spending figures should 'be ringing alarm bells among every economic observer'.

However, other economic analysts believe that the situation is not as grave as Davy Stockbrokers has made out, and that although public finances are in a sorry state, Ireland is not at risk of breaking the Stability and Growth Pact, as the limits for that agreement are calculated against the larger GDP figures, and not just Exchequer finances.

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