Brexit could cut €200m a year from govt. purse : ESRI

The ESRI says growth in tax revenue has slowed down this year - which it says will have implications for October's budget.


It says the revenue weakness, and the effects of Brexit suggest the government should take a cautious approach to increasing spending or cutting taxes.

And it says that Brexit could lead to a reduction in the Fiscal Space - the amount of money the government has available to spend - by about €200m a year after the UK leaves the EU in 2019.

In its latest quarterly economic commentary, the ESRI says that apart from VAT, all tax heads are showing either weak growth or actual declines, compared with what was expected at the start of the year.

Professor Kieran McQuinn, the lead author of the commentary, said "one of the most perplexing issues is that some of the labour related taxes - income tax and PRSI are registering only weak growth despite the fact that employment is growing quite fast and unemployment is falling".

There has been speculation that employment gains have largely been in lower paid work, yielding less in USC than anticipated.  Other tax head weaknesses, such as excise, may be related to Brexit, and the fall in the value of sterling.

Professor Mc Quinn said the weaker revenue growth argued for a more cautious approach to the budget, with no economic reason for increasing government spending or cutting taxes.  Indeed strong VAT receipts suggest that consumer spending will be one of the strongest drivers of economic growth this year...
 [rte.ie]
22/6/17