Tax surge to ‘up the ante’ for giveaway budget

Buoyant government tax receipts to be announced today will likely strengthen pressure for more give-aways in the looming budget.

Tax surge to ‘up the ante’ for giveaway budget

Analysts expect a news conference to be hosted this morning by Finance Minister Michael Noonan and Expenditure Minister Brendan Howlin will unveil another set of buoyant tax receipts, reflecting the quickening pace of growth in the economy.

Conall Mac Coille, chief economist at Davy Stockbrokers, said the tax figures will “up the ante” for political voices who will want the Coalition to deliver a very strong expansionary budget ahead of the election.

Mr Mac Coille said that he was still expecting Mr Noonan to deliver on overall budget package of spending rises and tax cuts amounting to €1.5bn.

But amid speculation the Government could hive off additional spending for health into a so-called supplementary budget, any such extra spending could effectively increase the overall budget figure towards €2bn mark, he added.

The tax and spending receipts to be announced today are the revenues the Government collected in the first nine months of the year.

For most of the year the amount of taxes collected has been well above the levels the exchequer had anticipated a year ago.

“I’d say the tax receipts will be between €1.6bn and €1.8bn above profile by the end of the year,” said Alan McQuaid, chief economist at Merrion Capital. “The economy is booming. The question it raises is whether there will be an overly generous budget.”

Mr McQuaid said he expects the Central Bank in its quarterly economic bulletin published later today to repeat the message that the Economic and Social Research Institute delivered earlier this week warning against any budget largesse.

The chief economist said the budget could exceed the proposed €750m in tax cuts by increasing indirect taxes on tobacco and petrol. The net value of the expansionary budget package would therefore remain at €1.5bn.

The Central Bank in a research note published yesterday said stable exchequer finances from income tax and the universal social charge receipts “played a key role in driving the recovery in total tax revenue since 2011.”

And the Government should use any unexpectedly large revenues to pay down debt, it said.

Economic indicators published yesterday provided some mixed signals about the strength of the economy.

The Investec Ireland purchasing managers’ index was still comfortably signalling expansion with a reading of 53.8 in September. A reading above 50 signals expansion in the manufacturing sector.

“We continue to view the sector as having more tailwinds than headwinds”, said Philip O’Sullivan, chief economist at Investec in Dublin.

The KBC Bank Ireland and ESRI consumer sentiment index weakened slightly, but “the September sentiment reading should still be regarded as fairly healthy,” KBC Bank said.

Details of the Live Register published yesterday also showed there were 337,300 people on the seasonally- adjusted count last month, down from 374,600 in September 2014.

Craft and related was still the largest occupational group on the Live Register.

There was an increase in the year of 2,069 people to 65,616 on so-called activation or training programmes, who are not included on the Live Register.

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