BUOYANT tax trends to be confirmed by today's exchequer returns for 1995, will benefit the Minister for Finance, Mr Quinn, as he draws up his Budget for this year.
Mr Quinn may use the publication of the returns to warn that some of the expectations being built up about his Budget package are too optimistic. Sources say he is likely to have about £80 million to £90 million in the Budget to spend on a social welfare package and up to £200 million to go on tax reliefs.
The final exchequer figures for 1995, to be published this afternoon, are expected to show that borrowing for last year came in below the £813 million Budget target, with a number of stockbroking forecasters expecting borrowing to be around £750 million.
The figures will benefit from strong growth in income taxes due to rising employment and strong VAT returns. However, corporation taxes have been running below Budget forecasts. NCB stockbrokers forecast that overall tax revenues will reach £50 million £60 million above the Budget target.
The Department of Finance is likely to forecast that strong tax trends last year will continue into 1996. Its forecast will not be published until shortly before Budget day, but will be a key factor in determining Mr Quinn's scope on Budget day. Departmental balances left at the end of last year and available for 1996 will be another key factor political sources say that there may be a sizeable sum carried over.
The Government is understood to be planning a social welfare package offering increases of 3.5 per cent to 4 per cent, which would cost £80 million to £90 million this year. The final scope for tax reductions is not clear, but is likely to be around £200 million, or possibly a little more when the impact of Budget measures on tax buoyancy is counted.
Close study is to be given to introducing a special low corporation tax rate for smaller companies which do not qualify for the 10 per cent manufacturing rate. The alternative is to further reduce the main corporation tax rate which was cut last year from 40 per cent to 38 per cent.
