Tax package is not that bad, but just wait until next year

BUDGET 2012 will take a lot of money out of an economy still struggling to emerge from the deepest recession in its history.

Following Budget 2012, current expenditure will be cut by €1,395 million, capital spending will be cut by €755m, the tax changes are intended to raise €1,015m, and PRSI changes are intended to raise €57m. This gives a total of €3,222m, but this rises to €3,822m when the €600m expected to be raised in 2012 as a result of the full-year effect of the changes introduced in Budget 2011 are factored in. This is one hell of a fiscal adjustment.

The general economic background against which Budget 2012 was set is very difficult and challenging. The international economic backdrop is deteriorating at a significant pace, the eurozone crisis is far from being resolved and continues to threaten the future of the euro, and domestic demand remains very weak and will be weakened further by the overall fiscal stance in Budget 2012.