The Department of Finance published its Pre-Budget Outlook in which the worst of the economic decline is said to have passed. A global recovery appears to be underway, however it is projected that Ireland will lag this recovery with GDP projected to decline by 7.5% this year and a more moderate rate of 1.5% next year. Without corrective action, the GDP deficit is predicted to rise to 14%, however the Government has stated its intention to introduce a €4 billion adjustment in the upcoming December Budget which will stabilise the deficit at 2009 levels.
Tax revenues are now at 2003 levels. It is anticipated that tax revenue for 2009 will be in the region of €32 billion and that there will be an overall decline again next year to €31 billion. All tax head yields experienced declines over the last two years; particularly CAT, CGT and Stamp Duty, which have dropped from €7.2 billion in 2006 to an estimated €1.5 billion in 2009.
According to the Budgetary Outlook 2010, the possible short-term measures to increase tax revenue are limited considering the impact of the increased taxes introduced in the 2009 Budget and the April Supplementary Budget. The necessary corrective action in the upcoming Budget will focus mainly on reducing Government expenditure; a form of fiscal correction which was broadly endorsed by the IMF, OECD and EU.
While further significant general tax increases are limited at this time, the phased introduction of a Carbon Tax is scheduled to commence in 2010. Further, the Commission on Taxation's recommendation that the tax base should be broader and less volatile is recognised as an important factor in the medium term.
Commenting on the Pre-Budget Outlook, the Minister for Finance said "preparation for the budget is well advanced and scope for further taxation increases is limited; the bulk of the required adjustment will come from expenditure savings."
The full statement from the Minister for Finance is available here
The Pre-Budget outlook can be accessed here