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Ireland To Proceed With Tax Reform Despite Deficit

by Jason Gorringe, Tax-News.com, London

06 July 2007


Irish Finance Minister Brian Cowen has said that an unexpected deficit in the government budget will not affect plans to continue tax reform.

Exchequer figures released on Tuesday revealed a budget deficit of EUR1.7 billion for the first half of 2007. This compares with a EUR1 billion surplus for the same period in 2006.

When asked in the Dail whether the worsening fiscal conditions would affect the government's pre-election pledge to cut income tax for low and high earners, Cowen responded: “Over the period of Government we have an intention to continue tax reforms, moderate current spending growth, increase capital spending and hopefully continue with the unprecedented economic performance we have seen in the past decade."

Cowen said that tax receipts in the first six months of the year are close to expectations, and that predicted strong economic growth will help to keep the government's finances on track. Irish GDP is set for 5% growth in 2007, the government has estimated - twice the rate of economic growth predicted for Europe generally.

CSO data for the first quarter of 2007 released earlier this week confirmed this, Cowen noted.

"I am confident that the prospects are for solid growth in the years ahead," the Finance Minister stated, continuing: "The Government, with our social partners will continue to pursue the policies that have served Ireland well over the last ten years. Investment in our infrastructure, our education system and moderate wage increases have enabled the economy to prosper. This has generated the resources for key improvements in our social services while maintaining a solid fiscal position. Our Programme for Government is framed around continuing that mix of policies."

"I remain confident that our overall Budget day targets for this year will be met," Cowen added.

Tax revenue, at EUR20.813 billion was EUR130 million below target at the end of June. Year-on-year, tax receipts were up 6.3% compared to the predicted increase for the first six months of 6.9%. The best performer was corporation tax (EUR173 million above target). Income tax was EUR27 million ahead of target. Excise duties, capital gains tax, stamp duties and VAT were all behind target, at EUR145 million, EUR118 million, EUR97 million and EUR19 million respectively.

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