Corporate tax comes in 11% over target putting pressure on Donohoe to increase spending

Finance minister Paschal Donohoe has seen corporate taxes for the first nine months of the year come in 11% ahead of target, giving rise to speculation that his budget-day spending package will exceed the €2.8bn he has already committed to.

While Mr Donohoe is planning the budget on the basis of a no-deal Brexit, the Government has raised its 2019 gross domestic product (GDP) growth forecast for this year to 5.5% from 3.9%, after growth for the first half exceeded expectations.

As talks with coalition partners the Independent Alliance and confidence-and-supply party Fianna Fáil are not yet concluded, Mr Donohoe is now coming under increasing pressure to sign off on new policy initiatives.

The Independent Alliance are due to meet Mr Donohoe today to finalise their demands, but are “deeply frustrated” at the lack of progress to date.

Speaking yesterday, Mr Varadkar said:

“All I can say is what Minister Donohoe and I have been saying for a long time now, [for] very many months — any tax cuts will be minimal and any welfare and pension package will be modest, nothing like what people will have seen the past three years, precisely because we will need to martial all our resources for public infrastructure, public spending, and preparing for no deal.”

At last night’s Fine Gael parliamentary party meeting, Mr Varadkar said the centerpiece on the budget will be supports for agriculture, business, and trade in the event of a no-deal.

The Taoiseach also said the allocation of €530m from the European Commission towards the €1bn Celtic Interconnector between Ireland and France will improve our energy security by linking our energy grid to the European mainland.

A no-deal Brexit could see a €6.5bn negative swing in the public finances, including an extra €1bn being needed for unemployment payments, it has been warned.

In its pre-budget submission, the Oireachtas Parliamentary Budget Office said the deterioration would arise from lower tax revenues and increased spending on Brexit and other social supports.

The report estimated expenditure on jobseekers’ benefits alone could be as much as €104m in 2020, increasing to €925m cumulatively by 2029.

The Irish Fiscal Advisory Council has endorsed as within the range of appropriate forecasts the set of macroeconomic projections prepared by the Department of Finance for Budget 2020 for the years 2019 and 2020.

“The Council is satisfied that the forecasts are within an endorsable range, taking into account the methodology and the plausibility of the judgements made. This endorsement comes at a time of exceptional uncertainty for the Irish economy,” said chairman Seamus Coffey.

“The endorsement decision covers a set of forecasts that assume a scenario in which the UK makes a disorderly exit from the EU. Although the Department of Finance has taken on board the impacts of a disorderly Brexit in its forecasts, the potential impacts from such a scenario could be more severe, especially in the short run,” he added.

Mr Donohoe’s budget is to be unveiled next Tuesday.