By Eamon Quinn
Spending and tax watchdog, the Irish Fiscal Advisory Council (Ifac) has told Finance Minister Paschal Donohoe to stick to his summer plan for a €800m budget package next month, or else raise taxes to fund any additional spending projects.
Assessing that the €800m in additional spending as set out by the Government in its summer statement will keep Ireland within its EU spending limits, Ifac chairman Seamus Coffey said any further spending plans would need to be funded, as the finance minister did last year by raising tax revenue from other areas in his budget day measures.
“They did it last year with stamp duty increases and corporation tax increases on intangible assets,” Mr Coffey said.
“Overall, the budget is worth around €3.5bn but an awful lot of that has been accounted for in public sector pay, capital spending, and for the increase in population.”
In its pre-budget report, as by tradition, the watchdog does not specify budget changes it might favour, such as the local property tax. But its latest assessment is hard-hitting in warning the risks are mounting of the economy overheating. Ifac has weighed in with Central Bank governor Philip Lane, who has advised the Government to pay down the country’s large debt burden by running annual budget surpluses at a faster pace.
“Any unexpected increases in tax revenues or lower interest costs that arise this year or in 2019 should not be used to fund budgetary measures beyond those currently planned,” Ifac said, citing the many risks facing the economy.
Those risks include “Brexit, rising protectionism, and the international tax environment”.
“It is inevitable that adverse shocks will occur in coming years,” it says.
Mr Coffey said the Government’s plan to put aside money into a so-called rainy day fund were still “ill-defined”.
Mr Donohoe has pledged to inject €500m into the fund next year.
Predicting continued economic growth, Ifac said the Government should inject any further bounties from corporation tax receipts to increase contributions to the rainy day fund or to pay down debt at a faster rate.