Donohoe’s budget looks likely to escape any EU sanction

By Eamon Quinn

Finance Minister Paschal Donohoe’s budget still runs the risk of breaching EU rules but Ireland appears to be out of any danger of facing sanctions when European finance ministers meet early next month, a report by Commission officials suggests.

The staff report found that the Government runs “a significant” risk this year, and a somewhat lesser risk in 2018, of breaching the so-called expenditure rule which was put into place to prevent any repeat of the conditions that helped push Europe into its debt crisis a decade ago.

The Commission’s staff report also raises questions about the sustainability of revenues from the key revenue-raising measure in October’s budget, the hike in the commercial property stamp duty to 6% from 2%, but assessed that Ireland, along with Estonia, Cyprus, Malta, and Slovakia, “to be broadly compliant” overall.

The report’s assessment of the expenditure rule is in line with warnings made last year by the Irish Fiscal Advisory Council (IFAC). IFAC is likely to give its judgment on the budget next week.

In its report, the EU staff said that the 2018 budget and in particular the hike in commercial property tax “amplifies the reliance on transaction-based taxes which, in the recent past, proved to be an unstable and highly pro-cyclical source of Government revenue”. It again identified the potential risks to Ireland’s economy as coming from uncertainty over Brexit and from any changes in US corporation tax and trade policies.

Belgium, Italy, Austria, Portugal, and Slovenia were in danger of noncompliance with budget rules, the EU said. EU finance ministers meet on December 5 to assess the reports.

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