The era of runaway increases in corporation tax receipts is over and the Government will need to take this into account when framing Budget 2024, Minister for Finance Michael McGrath has said.
Mr McGrath said there was a global economic downturn and “Ireland isn’t bulletproof” from it with a slowdown already evident in export performance.
Citing last month’s exchequer figures, which showed a sharp slowdown in corporation tax receipts compared to last year, the Minister said while he would not read “too much” into a single month’s figures “it does just underline the volatility of that tax” heading.
“And I do think that we are not going to see this year, or in the next number of years, the kind of percentage increases in corporation tax receipts that we saw in recent years,” he said. “That won’t be repeated into the future.”
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However, the Fianna Fáil TD said corporation tax would probably reach its projected level of €24 billion this year, but there would not be the sort of overshoots in receipts seen in recent years.
‘Need to be careful’
Bumper corporation tax receipts have seen the Government record large surpluses, but Mr McGrath and the Minister for Public Expenditure Paschal Donohoe want to set them aside in a savings and investment fund for the future rather than hiking day to day spending.
“All of that means we need to be careful in framing Budget 2024,” Mr McGrath told journalists on Tuesday at his party’s think-in at Horse and Jockey, Co Tipperary.
He said the budget would be focused on helping households meet increases in the cost of living.
He declined to be drawn on whether the budget package would be of a similar size to last announced last year, when – in addition to general spending increases – there was an additional €4 billion of once-off giveaways. Mr McGrath said this year’s giveaways would be “targeted at those who need them the most”.
Universal Social Charge
Mr McGrath said he had not decided on the shape of more than €1 billion in tax cuts in the budget, but confirmed that a reduction to the Universal Social Charge was among the options being considered.
He said further energy credits would also be considered but warned that with the economy at full capacity, the Government needed to be careful not to add to inflation as it would cost people more in the longer-term.
“We need to be careful that we don’t add fuel to the fire and we don’t start pushing inflation back up...But there will be help for people. There will be a set of temporary one-off measures to complement what is already a large budget package of almost €6.5 billion.”
Landlord tax breaks
Separately, Minister for Housing Darragh O’Brien strongly suggested tax breaks for landlords would be included in the budget with a view to slowing an exodus of small operators from the rental sector.
“The Government has already made a decision that we would bring forward meaningful and effective measures to retain and attract landlords in the market...We still have work to do over the next three to four weeks, but I do think it’s crucial that change is made,” he said.
“It didn’t happen last year. I think it’s urgent that it does happen this year. And Government has made a decision in that regard – that this will happen.”
He also said he wanted to see an expansion of the €1,000 renters tax credit.
