The Committee on Budgetary Oversight’s has called for better models to forecast corporation tax receipts, and a cautious approach to Budget 2020, due to Ireland’s economic exposure to Brexit, as part of the Pre-Budget 2020 Report published today.
“The Committee’s interim pre-budget report seeks to make Ireland’s budget-making process more transparent, inclusive and subject to greater parliamentary scrutiny,” said Committee Chairman Colm Brophy TD. “We hope that all of our recommendations published today are received positively by the relevant departments.”
The report provides detailed analysis of Ireland’s positive economic performance and highlights risks to the economy, which should inform Budget planning. These risks are both internal and external in nature. Internal risks are primarily arising from overheating pressures that may challenge Ireland’s competitiveness, increases in current expenditure that may be difficult to sustain and Ireland’s high debt burden. However, the more immediate risks are external, notably the potential of a hard Brexit, international corporation tax reform and the potential that effects of any downturn in global markets and changes in international trade policies.
Key recommendations include:
• That the Government establish a target debt ratio which would be stated as a percentage of GNI*, with a clear timeframe for meeting said target.
• Given volatility of CT receipts, and the role they have played in facilitating increased current expenditure in recent years, the Committee believes that this study should be brought forward and published in advance of Budget 2020. This will allow for its findings to be incorporated into the Budget, reducing the likelihood of unsustainable expenditure increases based on temporarily inflated CT revenue.
• That a cautious approach is taken to Budget 2020 that will allow sufficient scope for the Government to implement targeted support policies in the case of a hard Brexit, while also taking account of the possible call on resources arising from automatic stabilisers being triggered.
“We hope these recommendations can be examined and implemented alongside early and detailed engagement with the Committee as 2019 progresses,” Deputy Brophy said.
“The Committee recognises that the Irish economy is at an uncertain juncture at this moment in time. While there are undoubted overheating pressures on one side, there is still a large element of uncertainty around Brexit. The Committee is of the view that a cautious approach should be taken to Budget 2020, which would allow headroom for policy measures to be implemented in the event of a disorderly Brexit. The Committee also notes that Ireland must be vigilant at this moment given our existing high debt burden, especially if increased borrowing will be required in the future.”
Read the Pre-Budget 2020 Report and learn about the Committee’s recent reports, statements and membership here.
The report can be accessed here.