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ESRI: Hard Brexit Could Leave Less Room For Irish Tax Cuts

by Jason Gorringe, Tax-news.com, London

26 June 2017


The Economic and Social Research Institute (ESRI) has warned that a hard Brexit could have significant implications for the fiscal space the Irish Government has available for tax cuts and spending increases.

In its latest economic forecast, ESRI said that a hard Brexit would reduce Irish potential output by more than three percent over the medium term. It estimated that the "fiscal space" available for the budgetary process could be reduced by more than EUR500m (USD559.1m) for the first three years of a hard Brexit.

The report also noted that, with the exception of value-added tax, most of Ireland's major tax headings have either remained stagnant year-on-year or recorded negative growth in 2017. It said that since 2007, income tax has become a more significant component of overall taxation receipts, and that the concentration of revenues underscores the need to diversify the Irish tax system.

"A more balanced combination of different taxation items is optimal as it improves revenue stability, particularly, in the face of economic volatility," ESRI said.

ESRI has therefore revised downwards its revenue forecasts. It has increased its deficit forecast for 2017 from 0.1 percent of GDP to 0.5 percent. It expects there to be a deficit of 0.3 percent in 2018, instead of the surplus previously projected. ESRI's GDP forecasts remained unchanged, at 3.8 percent for 2017 and 3.6 percent for 2018.

ESRI said: "It is increasingly likely that Budget 2018 will have to be framed against the backdrop of lower than expected taxation revenues."

TAGS: tax | economics | value added tax (VAT) | Ireland | fiscal policy | gross domestic product (GDP) | budget | corporation tax | revenue statistics | individual income tax

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