Public Policy Bulletin, 8 July 2019

Jul 08, 2019

This bulletin takes a look at the top jobs agreed by EU leaders last week after three days of talks, the new draft trade deal agreed between the EU and South American countries and the June 2019 exchequer figures in Ireland which show that a record tax take could be on the cards this year. 

EU elections

After several days of negotiations, Italian MEP and socialist David-Maria Sassoli was elected as President of the European Parliament last week.  Mr Sassoli will succeed Italian Antonio Tajani.

EU leaders also agreed to nominate German Defence Minister Ursula von der Leyen as the next President of the European Commission.  Ms von der Leyen, who will succeed Jean-Claude Junker is a member of the European People’s Party and will become the first female president of the European Commission.

Belgian Prime Minister Charles Michel will become head of the European Council, succeeding Donald Tusk.

The EU leaders have also agreed to nominate Christine Lagarde, the head of the International Monetary Fund as leader of the European Central Bank.

Ireland’s June 2019 Exchequer figures

€26,671 million in tax revenue was collected in the first six months of 2019, almost 7 percent up on same period last year, according to the latest exchequer returns.  With year-on-year increases across corporation tax, income tax, VAT and excise duties, the government might be on course for another record tax take this year. 

Corporation tax generated almost €4.2 billion which was just below expectations but 3.5 percent ahead of 2018 figures.

Income tax of almost €10.5 billion was collected in the six months to 30 June 2019, €749 million ahead of the equivalent period in 2018.   This growth is an indicator of strong employment growth and incidentally this week, the CSO published statistics showing that the seasonally adjusted unemployment rate for June 2019 was 4.5 percent, down from 5.9 percent in the same period last year.

VAT, a key indicator or consumer spending and sentiment, was €345 million ahead of 2018 figures but 1.9% below targets for 2019. 

While on the face of it, the figures might suggest that the Minister for Finance has greater scope in terms of spending and taxes in October’s Budget, the Government has been warned not to repeat the mistake of using extra monies to fund day-to-day spending increases.  Time will tell.

EU and Mercosur reach political agreement on a free trade deal

The EU became the first major partner to agree a trade deal with Mercosur, a bloc of countries comprising Argentina, Brazil, Paraguay and Uruguay

The agreement, once signed off, will cover a population of 780 million and will remove the majority of tariffs (c. 91 percent) on EU exports to Mercosur, saving €4 billion in duties per year.  Its expected trade in goods will amount to €88 billion per annum, while services will be €34 billion.  For example cars exported to Mercosur currently attract 35 percent tariffs, chemicals (up to 18 percent), clothing (up to 35 percent) and pharmaceuticals (up to 14 percent) – all of these tariffs will be eliminated.

Both sides to the agreement will now perform a legal revision of the agreed text to come up with the final version. The European Commission will then translate it into all official EU languages and submit the agreement to EU Member States and the European Parliament for approval.

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