Business

Friday 16 November 2018

Government should not cut income tax in the October Budget, IMF warns

Finance Minister Paschal Donohoe. Photo: Gareth Chaney Collins
Finance Minister Paschal Donohoe. Photo: Gareth Chaney Collins

Donal O’Donovan

The Government should not cut income tax in the October Budget, and instead focus on preventing the economy overheating the International Monetary Fund (IMF) has warned.

The agency said that rather than the so called “fiscal space” of whether or not cash can be found for potential spending increases, Finance Minister Paschal Donohoe should focus on an “anti-cyclical policy stance”, ie an overall Budget that doesn’t add further to existing rapid growth rates.

The aim next year should be a small budget surplus rather than a deficit, the IMF’s Erik De Vrijer said.

However, at the same time IMF officials in Dublin for a regular mission, think greater spending on infrastructure and to support house building is justified.

Broadening the tax base, including linking property tax to house valuations and slashing Vat exemptions, would further boost the Exchequer, the IMF said.

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