Finance Minister Paschal Donohoe has said he won’t use bumper November tax receipts to hike spending as he faces criticism from the State’s independent budget watchdog for letting spending run out of control and for failing to reduce the budget deficit.
Mr Donohoe made the comments after bumper corporation tax receipts pushed the overall tax take in November to €631m ahead of target. Department of Finance figures show that taxation receipts for the month of November were €938m higher than in the same month last year.
November is the month when most businesses pay their tax, making it a key point for budget arithmetic.
“These additional receipts are not being used to finance additional expenditure,” Mr Donohoe said.
The numbers could mean the country closes the deficit this year, earlier than expected. The tax take is at an all time high, but spending has also increased ahead of plan – especially at the Department of Health – so the budget is still not balanced.
On Wednesday the Oireachtas Finance Committee will hear testimony from the Irish Fiscal Advisory Council that issued a stark warning last week that successive years of overspending, especially on health, risked a re-run of the bust in government finances seen in the recession if the economy turned down.
Citing persistent spending overruns, the report said plans for next year showed a Government spending increase of €4.5bn, well beyond a level of €3.5bn that the council had judged appropriate based on sustainable economic growth rates.
It noted that excess company tax revenues as well as a sharp decline in interest payments by the State had been ploughed back into spending and that plans to run a budget surplus had been repeatedly delayed.
Expenditure in November was marginally ahead of profile, the Department of Finance said.
Mr Donohoe did not directly address the findings of the council’s report, instead sticking to the broad terms of his Budget statement in October in which he painted a picture of conservative handling of State finances.
“Some of the increase in corporate tax receipts this year is due to one-off factors, which was signalled at Budget time and will not be repeated. For next year, my Department has taken account of this and has projected a decline in corporation tax receipts for 2019; expenditure plans have been set on this basis,” Mr Donohoe said.
The increase in corporation tax paid this year is partly down to a rise in company profits – and in particular the profits booked in Ireland by some large multinationals. It is also due in part to one-off changes in global tax practice that mean around €700m of extra tax will be paid this year. Economists have warned in particular against treating that windfall as normal State income, to use for day-to-day spending.
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