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No changes to Budget framework despite better tax receipts – Donohoe
The Minister for Finance has said he is not looking at making any further changes to the framework for October’s budget beyond what was set out in the Summer Economic Statement, despite better than expected tax receipts in recent months.
Paschal Donohoe was speaking during a webinar organised by the farm and agribusiness professional services advisory firm Ifac.
Mr Donohoe also warned that the unexpected increase in corporation tax take this year could be gone by 2023.
“Things have improved since then [Summer Economic Statement] but that is not going to lead to a change in our framework because some of the changes that have happened since June I’ve no guarantee those changes are going to be permanent,” Mr Donohoe said.
“And my focus is absolutely now on ensuring that by 2023 we have eliminated all the high levels of borrowing that we had to put in place to help us respond back to Covid,” he said.
“That is one of the reasons why we are making changes to the Pandemic Unemployment Payment this week,” he added.
Mr Donohoe said the state has borrowed €34 billion more than it was planning to help us deal with Covid, but also suggested that getting rid of the deficit could not be achieved overnight.
“To eliminate all of our borrowing across a single budget I think could be economically risky,” he said.
“To attempt to do it over three budgets creates the political risk that it will never happen. So I’m doing it over two budgets, which is what the Government has agreed to, I believe is the safe and sensible way of dealing with it.”
With regards to better than expected corporation tax receipts this year, Mr Donohoe said there is every prospect that the extra €1 billion could be gone by 2023.
“We already have risks in the reliance that we have on corporate tax,” he stated, alluding to ongoing negotiations around changes to the global corporation tax structure, that may lead to a global minimum corporation tax rate of 15%.
“So even though the extra money has came in in corporation tax there is every possibility that in a couple of years that corporation tax revenue, the additional bit, won’t be there.”
Mr Donohoe said he has a growing sense of relief about the economic situation, as we begin to emerge from the pandemic.
“While our borrowing figures are beyond what I could have comprehended in a non-Covid environment, they are lower than I expected them to be, and indeed forecasted them to be last April. So that is really positive,” he said.
“But as we look beyond 2023 we will have different challenges and issues that we will need to consider and we will need to start thinking about those early next year.”
Regarding the issue of ongoing disruption to supply chains, Mr Donohoe said it is a global challenge
He said that for the next while, supply is going to influence demand when it is normally the other way around.
However, he said he expects the food sector in Ireland will be one that will be able to respond back to this challenge far better and far more flexibly and that he is optimistic that this might be the least of the supply challenges Ireland might face.
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