THE Government parties are to start intense discussions on a package of income tax and PRSI reductions for the Budget after Exchequer figures for 1995 confirmed strong growth in tax revenues. The Minister for Finance, Mr Quinn, said the figures showed a strong Exchequer position, but cautioned that he would still be "quite constrained" on Budget day.
Strong growth in income tax revenue. VAT and Excise duties meant Exchequer borrowing last year was £627 million. £186 million less than forecast.
The opposition parties used the figures to renew their attack on the Government's handling of the economy, while the trade unions said they highlighted the need for PAYE cuts.
Sources believe that a continuation of economic growth this year means tax and PRSI reductions in the Budget can total up to £200 million, similar to the 1995 Budget. The Department of Finance has to present the Government with its final forecasts of pre Budget tax and spending in 1996. This will allow final decisions to be made.
The Budget is expected to include
Over £100 million in extra spending, including an early retirement package for the defence forces, social welfare increases of 3.5 to 4 per cent and specific measures to tackle long term unemployment
A broadening of the standard 27 per cent income tax band and reductions in both employers and employees PRSI, aimed particularly at lower paid workers New measures to cut the tax burden on service companies. possibly through a special low tax rate for smaller companies.
Last year, Exchequer borrowing came in well below target, due partly to a strong late surge in tax revenues which left the total tax receipts £139 million ahead of Budget projections. Income tax revenues benefited from an estimated 42,000 increase in employment.
Exchequer borrowing last year was 1.9 per cent of GNP, one of the lowest figures in the EU.
Reacting to the figures, Mr Peter Cassells, general secretary of the ICTU, called for substantial tax reform" and special measures to tackle long term unemployment. The vice president of SIPTU. Mr Jimmy Somers. said PAYE workers had been "bled dry" and more low paid workers should be taken out of the tax net.
Meanwhile two business lobby groups. IBEC and the Chambers old Commerce of Ireland, said the figures again showed the need for much tighter control of public spending.
The Fianna Fail leader, Mr Bertie Ahern, said the Exchequer returns showed that the economy was doing well but the Government was doing badly.
In 1995, the Rainbow Coalition have added £1 billion to the national debt, pushing it over £30 billion". he added.
Commenting on the role of Democratic Left, Mr Ahern said "Many people will view with dismay the fact that Government economic policy is now being driven by a party with 1 per cent support in the opinion polls."
Mr Michael McDowell, finance spokesman for the Progressive Democrats, said the lesson of the Exchequer returns was that yet another opportunity to tackle Ireland's economic problems had been lost.
He said the result of three years of Labour in government could be summarised in stark statistics national debt up 15 per cent to £30.2 billion income tax up 21 per cent to £4.1 billion current spending up 30 per cent to £9.2 billion the public service pay bill up 23 per cent to £4.6 billion.