Finance minister targets budget surpluses but not for rainy day fund
A late surge in corporation tax paid in November will help nudge the overall financial health of the State into a bigger-than-expected budget surplus of around €1.4bn for this year, according to Finance Minister Paschal Donohoe.
The amount of tax paid by companies last month was €700m ahead of expectations as a surge that has been running since 2015 continued into the most important month for tax payments, the minister said.
The Irish Fiscal Advisory Council has repeatedly warned Mr Donohoe against spending proceeds of this tax surge. It thinks €2bn to €6bn of the tax bonanza is not in line with economic assessments of the Irish tax base and could therefore vanish.
Minister Donohoe told reporters last night that he doesn't intend to spend the extra cash or to funnel it into the so-called rainy day fund. The money will be handed to the National Treasury Management Agency (NTMA) and will be available to the Exchequer if required.
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He said he does not expect the NTMA to use the cash to reduce the national debt. The revised budget surplus is 0.4pc of gross domestic product (GDP).
Davy Stockbrokers chief economist Conall MacCoille said he thinks the final surplus will be larger still, at around €2bn or 0.6pc of GDP.
In a wide-ranging speech at the Institute for International and European Affairs (IIEA) in Dublin, the minister also announced new fiscal targets.
Those included a budget surplus of 1pc of GDP by 2022 and a ratio of debt to the size of the economy of 85pc - measured using the new modified gross national product (GNI*).
That timescale is well beyond the next election.
Those targets would change if there is a 'no deal' Brexit, however. The risk of that has shifted from this year to next year, but is still real, he said.
"A disorderly exit - either without ratification of the revised Withdrawal Agreement or at the end of the transition period in 2020 - remains a distinct possibility in the not-too-distant future."
The minister said that assuming continued economic growth, the Government will target annual increases in the budget surplus over the coming years as a guard against global uncertainty.
That implies that improvements in the State's finances will not be used to cut tax or boost spending under Fine Gael.
Overall, the latest tax figures mean tax paid to the State this year is now around €600m more than was anticipated as recently as October's budget, the minister said.
Corporate tax receipts, much of it from a handful of US multinationals, will top €11bn this year and that tally is expected to be higher again next year. But Minister Donohoe said he expects those receipts to decline after that.