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Cowen Rules Out Irish Income Tax Cut

by Jason Gorringe,, London

21 November 2007

Ireland's Minister of Finance, Brian Cowen on Tuesday appeared to rule out any new tax cuts in December's budget, with slower economic growth compelling the government to concentrate on fiscal consolidation.

Setting out the government's policy priorities, Cowen said in a keynote address to the Indecon Public Policy Lecture that he anticipates "a more difficult fiscal environment" next year compared with 2007.

"In a tighter economic environment it is unrealistic to expect the type of tax cuts which have been a feature of recent years," he remarked, according to national media reports.

He added that only tax cuts "which are consistent with the prudent management of the economy" will be considered by the government.

"In that context the level of increase in current expenditure will moderate to around 8% with a further easing in day-to-day expenditure growth in subsequent years to more closely reflect the rate of growth in the overall economy," he explained.

In last year's budget, Cowen indicated that he would cut the top rate of income tax to 40%, but his more fiscally conservative comments on Tuesday suggest that these plans may have been shelved.

In the pre-Budget outlook (PBO) last month, Cowen noted that the Irish economy was at a "turning point", and that GDP growth is expected to moderate from 4.75% this year to 3.25% next year. This is likely to have a knock-on effect on the government's budget as tax receipts slow.

Cowen also confirmed in the PBO that an Exchequer deficit of up to EUR1 billion is now forecast, as opposed to the deficit of EUR546 million forecast at Budget time, reflecting the weakness in some taxes, mainly as a result of the more uncertain property market.

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