Donohoe pledges budget support for central Ireland amid cost of living crisis but says money available is limited
The 2023 budget will include “broad” cost-of-living aid for all households, including workers who are not eligible for social assistance or other benefits.
Finance Minister Paschal Donohoe said middle-income people faced “real anxiety and concern” due to rising energy bills.
“They don’t earn enough to be immune to the big changes that are happening now in the price of electricity and the price of gas. This is a very important group within our economy and our society.
However, he said there are “constraints” on the budget given rising interest rates and the economic downturn in Ireland’s main trading partners in the US, UK and in the EU.
The windfall tax levies expected this year will not change the size of the €6.7 billion package announced this summer, he said, but it could impact the mix of measures.
“I am fully committed to delivering our budget within the parameters that were announced earlier in the year,” he told reporters on Thursday.
“Do I have parameters in mind regarding the scale of measures that we can offer later in the year? I do. But there are constraints on how much we can help.
The budget will have “at its core measures that can help, that can help deal with the rising cost of living,” Donohoe said.
He said he was “confident” that the EU would soon approve a fund to help businesses cope with rising energy costs.
But he threw cold water on the idea – currently being discussed by the EU – of an energy price cap. And he wondered about the impact of an exceptional tax on energy companies, which the government is discussing.
He said any measures should “not create additional risk” to public finances or the economy in the wake of impending interest rate hikes and rising borrowing costs.
Alongside the budget, the government is considering how to ‘strengthen the resilience of our national finances’ given the state’s reliance on corporation tax and the income tax of high-income multinational workers .
This could jeopardize future tax revenues, the Ministry of Finance warned in its annual tax report on Thursday.
A rise in tax revenue last year – the take was 3.7 billion euros or 16% more than pre-pandemic levels – was largely due to wage increases, not the creation jobs, according to the report.
Corporate tax revenue jumped 41% last year, or 4.4 billion euros, compared to 2019, reaching a record of 15.3 billion euros over the year.
That helped fuel a €48 billion Covid support package in 2020 and 2021, the report said.
Pandemic-proof sectors such as IT and pharmaceuticals were behind the one-off tax hike last year, which continued into 2022.
But last year’s OECD deal – taxing big companies 15% of their global income and shifting taxing rights to the countries where they make their sales – could see Ireland lose around £2bn. euros per year in corporate tax revenue once it is implemented, which is unlikely. before 2024.
If this – or an economic downturn – forces a reduction in multinational investment in Ireland, it could herald a “very substantial loss of income tax (and PRSI) revenue”, the tax report says.