Tough Budget Anticipated In Ireland As Tax Revenue Slumps

by Jason Gorringe, Tax-News.com, London

06 November 2002

Following the release of the October Exchequer Returns, economists in the Republic of Ireland have predicted that the government could be facing a deficit of over 2 billion euros by the end of the year, and have warned that this is likely to make for a tough 2003 budget.

According to experts, sliding corporate tax receipts and government spending levels which have barely been reduced despite repeated warnings, do not bode well for next year's budget.

Speaking to the Irish Independent about the Finance Minister's pledge - made earlier this year - to cut spending growth back to 14%, IIB Bank economist, Austin Hughes explained that in order to achieve this, expenditure would need to drop by between 1% and 2% on last year's level:

'To get even close to it we would need cosmetic measures that will only serve to worsen the outlook next year. It means a gloomy outlook for the economy and for next year's Budget,' he observed, adding with regard to Mr McCreevy's 1.3 billion deficit projections, that:

'We will need significant changes not to have a dramatic overshoot on the Minister's total. If things do not improve dramatically it's possible that in a worst case scenario we could double the Minister's projection.'

On the plus side, according to the Irish Independent, increased VAT returns have indicated that spending levels in the Republic were healthy during the period in question. However, this appears to be one of the few bright spots on Mr McCreevy's horizon, as he looks to compiling his next budget.

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