Warnings by the ESRI that Budget tax cuts could be premature have been dismissed by Finance Minister Michael Noonan.
The conservative economic think-tank intervened after Taoiseach Enda Kenny said raising the level at which low and middle income earners hit the top tax rate was a priority for the Government.
The ESRI’s John FitzGerald questioned the ambition, and urged the Coalition to stick to plans to impose €2bn worth of tax hikes and cuts in the October Budget unless the financial situation eases in the autumn.
“The problem for the Government is they’ve got to actually take money out of the economy this year and if they want to have tax cuts, they’ve got to take more out to leave room for it. It’s too early to talk about an end to cuts.” Mr FitzGerald told RTÉ.
The economist also warned that the next government was likely to have to hike water charges in order to plug an estimated €150m shortfall in revenues for Irish Water. However, Mr Noonan’s spokesperson sounded a more optimistic note on the desirability of tax cuts in the autumn.
“Tax changes can create and support jobs. The Vat reduction to 9% in the tourism sector, the abolition of the Air Travel Tax, the introduction of the Home Renovation Incentive are all examples of tax changes introduced that have worked and supported job creation,” the Finance Minister’s spokesperson said.
Tánaiste Joan Burton has indicated she wants to ease the tax burden on low and middle-income earners in October and points to an upturn in the economic situation, meaning the €2bn adjustment can be avoided while Ireland still meets its commitment to reduce the deficit to 3% of GDP.
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