Thinktank warns against tax cuts

The Nevin Economic Research Institute has called on the Government not to introduce any tax cuts in next month’s budget and to implement €800m in consolidation.

Taoiseach Enda Kenny has said over the past week that the Government will look at ways of reducing the income tax burden in the next budget.

However, the institute, in its latest quarterly commentary on the economy, said there was no fiscal room for tax cuts. Instead, it wants investment in social housing, education and high-speed broadband infrastructure.

Moreover, in view of the low interest rate for the sovereign, the Government should ramp up borrowing over the next few years to increase investment in the economy to reach an average of 3% of GDP each year. Finance Minister Michael Noonan said the forthcoming budget would be broadly neutral, apart from the water charges.

The institute wants a budget consolidation of €800m as it balances the requirement for fiscal prudence with the need to avoid doing harm to an emerging economic recovery.

It wants the consolidation to be achieved through tax measures rather than spending cuts. This includes the water charges; €150m in carry-forward savings through the Haddington Road Agreement; €100m through extra compliance from the Revenue Commissioners and the remainder to be raised through an increase to employer contributions and other measures.

Institute economist, Tom McDonnell warned against reducing the revenue-raising capacity of the State.

“Given Ireland’s low revenue base, there is no room for a reduction in the overall level of taxation.

“Instead, there is a strong case for the Government to fund a large-scale programme of public investment... While the latest quarterly figures are positive, concerns remain around the high level of debt, weak credit conditions and unemployment,” said Dr McDonnell.