Finance Minister Paschal Donohoe said he plans to “wipe out” the state’s high level of pandemic-related borrowing over the next two budgets. He also warned that an additional billion euros in corporate tax this year could disappear by 2023.
Speaking at a food and agri-food event hosted by professional services firm Ifac, Donohoe said he does not envision further changes to the government’s budget strategy beyond of what was stated in its recent Summer Economic Statement (SES) despite better than expected taxation. received in recent months.
“Things have improved since [SES] but that is not going to lead to a change in our framework because some of the changes that have happened since June, I have no guarantee that these changes will be permanent, ”he said.
Mr Donohoe said his goal was “now to ensure that by 2023 we eliminate all high levels of borrowing” required by Covid.
He noted that the state has borrowed 34 billion euros more than originally planned due to the pandemic, while suggesting that the elimination of the deficit could not be achieved overnight. the following day.
“Eliminating all of our borrowing on one budget, I think, could be economically risky,” he said.
“Trying to do it on three budgets creates the political risk that it will never happen. So I’m doing it on two budgets, which the government has agreed to, I think is the safe and sensible way to manage it. “
Regarding the recent rebound in corporate tax revenue – August treasury statements showed that business tax has so far generated € 7 billion, or € 859 million more than expected – Mr Donohoe said there was every chance that the extra billion euros could disappear. by 2023.
“We already have risks in the dependence we have on corporate taxes,” he said.
The corporate tax base in Ireland is increasingly concentrated around large multinationals. The 10 largest companies accounted for just over half of the nearly € 12 billion in revenue generated last year, while global tax reforms, including the prospect of a minimum global rate, pose significant risk .
“So even though the extra money has gone into corporate tax, it is quite possible that in a few years the corporate tax revenue, the extra bit, won’t be there anymore,” said Mr. Donohoe.
The minister said he was not frustrated with the country’s new financial measures, but had “a growing sense of relief” that the enormous job damage caused by the pandemic “was starting to ease. “.
He said there was the possibility of having fewer than 100,000 people on the Pandemic Unemployment Payment (PUP) by October, up from 640,000 at the peak.
“Although our borrowing figures are beyond what I could have understood in a non-Covid environment, they are lower than what I expected, and I even expected them last April,” did he declare.
On the recent upturn in inflation and supply chain issues affecting the Irish economy, Mr Donohoe said these challenges are affecting the global economy.
“Because the supply will be limited, it will ration the demand [across a range of products],” he said.
Ifac’s latest opinion poll suggests that while confidence among agribusiness companies has increased in recent months amid the lifting of restrictions, a significant number of companies are reporting difficulties related to rising costs, recruitment and Brexit.
More than two-thirds (71 percent) reported an increase in costs this year, from transportation and energy to raw materials and packaging, “a problem – in some cases – that could be contributing to inflation. food prices in the coming months, “the report warned.