Slumping Tax Collection Means More Bad News For Irish Budget

by Jason Gorringe, Tax-News.com, London

04 October 2001

There were more headaches for Irish Finance Minister Charlie McCreevy this week, as Exchequer returns revealed that slumping tax collection may mean that the budget surplus could fall to around £800 million, a huge drop from earlier predictions of £2.5 billion.

Officials in the Finance Department say that even this figure assumes some improvement over the last 3 months of the year, and have warned that this year's tax revenues may well be 'significantly more' than £1.5 billion below target. The Exchequer returns show that although nearly all major taxes are below expectations, income tax collection is especially weak, and lower consumer spending has resulted in a disappointing 6.7% increase in VAT receipts, where previous estimates suggested that a rise of 18% could be possible.

All this means that the Finance Minister is essentially hamstrung, and a 'giveaway' budget in the run-up to the election now looks increasingly unlikely, as it would inevitably lead to a return to borrowing next year, and the government is not at all keen to return to the bad old days of huge budget deficits.

Mr McCreevy seems resigned to his fate, however, and his comments on the Exchequer returns showed none of the fire displayed when he was challenged by the European Union last year over his generosity in the previous budget. 'The accelerating weakness in tax receipts underlines the necessity for a prudent approach to the public finances, particularly over the coming months in order to ensure that the economy weathers the present global difficulties,' he said this week. 'We will all have to adapt our expectations in the short term in order to ensure continued strong growth over the medium term which will benefit all sectors of society.'

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