IFAC says Exchequer figures show strong economy but risks remain
The amount of tax collected by the State during the first seven months of the year was up 9.5% on the same period last year, driven by income tax, corporation tax, VAT and excise duty.
The Exchequer returns for July, released yesterday, show that during that month alone, €7.6 billion in tax was taken in, up more than 10% on the same month last year.
However, the figures also show that Government spending continues to run almost 5% over budget.
Acting Chairperson of the Irish Fiscal Advisory Council Professor Michael McMahon said the latest tax returns indicate a strong economy in Ireland.
Speaking on RTÉ’s Morning Ireland, he said the concern is always about the reliance on corporation tax, especially coming from outside Ireland.
“These numbers show income taxes up, VAT is up, excise duties are up. That’s the sign of a strong economy with high consumer spending. And so that is a good news story,” he stated.
But he added that if the world or the US were to go into recession, the Irish economy would be affected.
“But the whole world would be potentially affected. And if particular sectors such as the tech or pharmaceutical sector were to be hit by this recession, then we would also see tax losses from that side and that could really hit these tax revenues, whereas on the spending side, the Government would be expected to keep spending,” the Professor stated.
“So, we could switch very quickly from a what looks like a very healthy position into one that looks very much less healthy,” he cautioned.
Professor McMahon pointed towards the recent Summer Economic Statement released by the Government, acknowledging that the last budget had not allocated enough spending for health.
“The Summer Economic Statement set aside €1.5 billion for the next Budget to cover that overrun. Already in 2024, and we’re only through information up to the end of July, the overrun in health is at €1.4 billion,” he noted.
“Traditionally, the health overruns accrue mostly later in the year, and so right now it looks like that €1.5 billion is already going to fall short,” he said.
“We’re starting to see overruns in other parts of Government spending as well, with the total overrun now €2 billion higher than had been projected,” he added.
On the next Budget, he said cost of living supports like energy credits should be targeted to those people who really need them.
“What we have always said on these is that it is up to the Government to determine where they want to spend money, what we worry about is an ‘everything now’ approach,” he said.
“So, if you do want to give cost of living support to certain groups – and there’s certainly groups in Irish society that need them – then they should be targeted at those groups,” he said.
But he says that such cost of living supports should not be given in a universal way.
“But equally we have to be careful with not cutting taxes. There are people who can afford to give a little bit more into the coffers, but this is ultimately a choice of Government,” he said.
“But the everything now approach is something that puts us in a really risky position,” he added.
Article Source – IFAC says Exchequer figures show strong economy but risks remain – RTE
