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Tax fears mount as national debt soars

The interest payment on our national debt will have soared to €7bn a year within five years.

To pay this, €1 in every €5 taken in tax will go towards servicing the debt, according to the Department of Finance.

Our national debt has soared from €25bn in 2007 to €50bn in 2008 and €75bn last year and Finance Minister Brian Lenihan has expressed concern about the cost of servicing this debt.

"This is clear evidence of the need to take action to achieve long-term sustainability of the public finances," he said.

The cost of servicing the interest payments alone on this huge debt has already increased from €1bn to €2.5bn in the space of a a year and is expected to hit €7.75bn in 2014.

By this time the national debt is set to top €148bn. The projection does not include the €54bn cost of the National Asset Management Agency (NAMA) plan to acquire toxic property loans from the banks with taxpayers' money.

The figures come as the opposition warns that the economy is in the grip of one of the worst recessions of the industrialised economies since the World War Two. Exchequer returns for 2009 showed that there was a €24.6bn deficit in the public finances compared to a deficit of €12.7bn in 2008.

Deadline

The deficit is slightly better than forecast in last month's Budget and this was mainly due to a rise in capital gains tax because of a shift in the payment deadline.

There was also a rise in the income from excise duty on alcohol and tobacco as consumers stocked up before the budget in anticipation of a tax hike that never came.

Tax returns for the year, however, were almost back to 2003 levels at just over €33bn. There was also a sharp fall in income tax and VAT receipts over the summer months.

Government spending was slashed by 4.4pc to €47bn and Mr Lenihan said he believed the Exchequer returns overall showed that the Government's plan to manage the public finances was working.

"As I said, economic growth will return during the course of this year and will assist in the ongoing improvement of the public finances," he added.

But Fine Gael finance spokesman Richard Bruton said the figures showed the Irish economy had markedly deteriorated in the last 12 months and the Government's "ill-thought out responses did nothing to limit the damage".

He stressed the need for radical reform of public services because the one-off measures of €6bn in next taxes and €2bn in public sector pay cuts and the €4.5bn in capital spending cuts could not be repeated.

Labour finance spokeswoman Joan Burton said the poor returns highlighted the absence of a coherent jobs strategy.

csheehy@herald.ie


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