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Irish Budget Watchdog Warns Against 'Risky' Use Of CIT Revenues

by Jason Gorringe, Tax-News.com, London

06 December 2016


The Irish Fiscal Advisory Council (IFAC) has warned the Government against "using unexpected tax revenue for difficult-to-reverse spending increases."

In its November 2016 Fiscal Assessment Report, the IFAC noted that spending increases will "absorb the majority of the better than expected tax revenues, which are mainly due to corporation tax."

The report argued that this "goes against the spirit of the new budgetary framework and is especially risky when the source of the additional revenue is corporation tax." It pointed out that the sustainability of recent corporation tax increases has yet to be verified.

IFAC said that if this pattern is repeated over the next several years, it could undermine the public finances and "would not be conducive to prudent economic and budgetary management."

According to IFAC, "had all the unexpected corporation tax revenue in 2015 and 2016 been used for deficit reduction, the budget would have been close to balance in 2016 and the government accounts would move into surplus in 2017, two years earlier than projected by the Government in Budget 2017."

The Council added that the EUR3bn (USD3.2bn) package of new tax and spending measures for 2016-17, announced over the course of this year, "goes beyond the limit considered prudent by the Council." It stated that in 2018, the carry-over cost of measures introduced in Budget 2017 is EUR650m, a sum that will "absorb over half of the estimated fiscal space for 2018."

"This implies limited resources for new tax and spending initiatives without offsetting savings or new revenue raising measures," it explained.

TAGS: tax | Ireland | fiscal policy | government committee | budget | corporation tax | ministry of finance | tax rates | revenue statistics | tax reform

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