Tax Cuts Highly Unlikely In Irish Budget

by Amanda Banks, Tax-News.com, London

19 October 2001

In a speech on the Irish economy to the Seanad Eireann, Mr McCreevy said 'the latest tax revenues to end-September support the view that the economy is slowing, with tax receipts growing by 2.2 per cent for the first three quarters of the year compared to a Budget target for the year as a whole of a 12.5 per cent increase over last year's outturn.'

Mr McCreevy confirmed that the latest expectation for the Exchequer Surplus this year will be at least 1.9 billion euros or IR£1.5 billion lower than that forecast on Budget Day and quite possibly significantly more. He said that private sector leading indicators, tax revenue and housing data had already shown that there would be reduced carryover of growth from 2001 into 2002. 'The events of September 11 will only hasten this slowing of the Irish economy, with the main effects being in 2002,' he said.

The Finance Minister also commented on the state of Ireland's exports, tourism and air transport which have all been affected by the terrorist attacks and in turn will impact upon the country's economic outlook.

With regard to exports Mr McCreevy pointed out that 35 per cent of Ireland's exports to the US are from the chemicals/pharmaceuticals sector. 'There is no doubt that our exports to the US will be affected by the US attack,' he said,'this is why we must ensure that wage and cost developments generally do not add to our exposure on the competitiveness front.'

Tourism represents 9 per cent of employment and 5 per cent of Irish GNP. The Finance Minister cited the effects of the Gulf War which saw US visitor numbers to Ireland fall by 20 per cent and did not recover for three years. Already Aer Lingus, which generates around 70 per cent of its profits from transatlantic flights, has reported an 'extremely serious dowturn in its traffic,' said Mr McCreevy.

However, it was not all doom and gloom for the Minister as he concluded: 'Looking slightly further ahead, I have no doubt that the Irish economy is in good health and that with the right approach, we can pass through these short-term difficulties which we have been presented with.'

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