The Irish economy bounces back

Pearse Kenney – Senior Tax Manager with HC Financial Advisers Ltd

With the Irish economy on the up, next month’s budget is as good a time as any to start saying thanks…

The news that the Irish economy is growing at its fastest rate since 2007 was warmly welcomed in all quarters over the last week. Figures published by the Central Statistics Office showed that the economy grew by 1.5 per cent between April and June of 2014 and by 7.7 per cent when compared with the same period in 2013.

The strong growth numbers prompted the Government to upgrade its overall growth forecast for 2014 to the region of 4.5 per cent, an increase from the three per cent predicted the week previously, which in turn was an increase from the 2.1 per cent forecast back in April. Things are certainly on an upward curve.

In keeping with improving forecasts, it was also reported that the budget deficit for this year, which back in April was forecast to be at 4.8 per cent of GDP, is now estimated to come in at 3.5 per cent of GDP. If this comes to pass, then the three per cent target set by the Troika for next year will seem a lot less daunting than it did only a few months ago.

These improving figures, together with recent robust Exchequer returns, will make the Government’s stated intention to have a neutral budget next month (without an increase in taxes or further cutbacks to meet their targets) more easily attained.

In fact, for some, the budget might hold more than had been anticipated, as it is increasingly likely that it will include a level of tax relief for low and middle income earners which was  originally earmarked for 2016. Minister Noonan, who heretofore had been quick to point out that it would not be a giveaway budget (shouldn’t that be giveback anyway?), appears to have conceded as much and has framed an adjustment to the personal taxation system as a way of creating jobs and attracting back home those who have emigrated. Clearly, it will also benefit those already here and within those income brackets.

The Taoiseach added to this expectation by giving his strongest indication yet that that the upcoming budget would begin the process of easing what he called the “tax burden” on low and middle income earners by addressing the income level at which the 52 per cent rate of  tax (Income Tax, PRSI & USC) hits the taxpayer.

Pearse Kenney – Senior Tax Manager with HC Financial Advisers Ltd

With the Irish economy on the up, next month’s budget is as good a time as any to start saying thanks…

The Government is now faced with the task of prudent economic management in the light of heightened expectation among the public. While Ireland is recording the strongest economic growth in the European Union, it still has one of the highest levels of national debt within the union – a debt burden, which will have to be trimmed substantially over the next decade if it is to reach sustainable levels.

However, prudent economic management, in this context, is not another way of saying continued austerity. There is no ignoring the fact that the economy is on the up and the Government has increased scope to balance measures for sustainable economic growth with measures which recognise the Irish public’s role in achieving the return to growth. And next month’s budget is a good time as any to start saying thanks.

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