The Oireachtas committee has been informed that without the ‘windfall’ portion of the corporation tax, which is estimated to account for half of this year’s projection, there would be a budget deficit. The projection was outlined by Finance Minister Michael McGrath before the Committee on Budgetary Oversight. Despite increases of approximately 5% last year and projected increases of 2.5% this year, he noted a substantial deceleration compared to the 50% hike in 2022.
He warned that the corporation tax income might ultimately be fleeting, as it isn’t strongly tied to the domestic economy. The forecasted revenue of €24.5 billion, a 2.5% increase on 2023, would result in a predicted budget surplus of €8.6 billion this year. Meanwhile, overall taxation is predicted to rise by 4.5%, reaching €92 billion.
The government has established two sovereign wealth funds as a precautionary safeguard for future economic instability. With a 1.6% inflation rate in April, one of the Eurozone’s lowest, the preferred measure for domestic economic activity, Modified Domestic Demand (MDD), is expected to increase by 1.9% this year before accelerating to 2.3% next year.
Mr McGrath presented these reports as part of the Stability Programme update to the European Commission at the end of April. Independent TD for Galway, Seán Canney, highlighted a pressing need in the private housing market, with only one private scheme across the entire Galway county currently in progress. He indicated that the standard procedure for a developer purchasing a site involved a deal with the local authority or a housing body because obtaining funding independently was impossible.
Recognising this reality, Paschal Donohoe, Minister for Public Expenditure, noted that the state has intervened in three ways: through housing initiatives introduced by Housing Minister Darragh O’Brien, via the help-to-buy scheme to reassure the private sector about the availability of a deposit, and lastly, through the shared equity scheme.
There’s still considerable advancement to be achieved, a fact I’ve openly admitted. However, assessing this year’s first quarter with regards to planning applications submitted and homes finished, generates a certain level of optimism. This implies that the influence of Government involvement may result in an beneficial effect on output.