The Government would be running a budget deficit for the 18th consecutive year in 2024 were it not for windfall corporate tax receipts.
That sequence stretches all the way back to the financial crisis, a time when the crumbling Irish financial system was the focus of European policymakers, not just Irish ones.
Remove the windfall component of tax receipts and the Department of Finance suggests the Government would end the year with an underlying deficit of €2.7 billion, instead of the €8.6 billion surplus currently projected.
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The €8.6 billion figure could yet be revised upwards with corporate tax outperforming again. We’ll get an idea of where the Government expects to land in its Summer Economic Statement (SES) later on Tuesday.
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Apart from updating us on the Department of Finance’s economic outlook, the statement will set out the fiscal parameters of the upcoming budget, now taking place a week earlier than expected on October 1st amid speculation that this is to facilitate a general election later in the autumn.
Without the windfall component of corporate tax, the budgetary parameters would be a lot narrower, the capital spend on things like housing and health more constrained and the room for tax cuts very narrow, particularly if the Government was minded to shadow its own spending rule.
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All of which is not to say the Government’s budgetary arithmetic is bogus, just that it flatters to deceive.
With an election on the horizon, backbenchers getting itchy feet and a financial bazooka in terms of windfall tax receipts at his disposal, newly installed Minister for Finance Jack Chambers will have a tough time keeping a lid on his budgetary package.
Whatever he decides will be closely scrutinised by the Central Bank and the Irish Fiscal Advisory Council, which are already warning about the overheating potential of a big package.
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