Pearse Kenney, Senior Tax Manager with HC Financial Advisers Ltd
The omens for 2015 are positive overall and conditions now appear to be in place for a period of sustained growth, writes Pearse Kenney, Senior Tax Manager, HC Financial Advisers
January can often be the cruelest month. Christmas becomes a distant memory and the anxiety that January can bring (or “Janxiety” as it has now been termed) soon replaces the seasonal cheer. The previous month’s excess manifests itself in credit card bills and the wait for the first pay day of the year can feel interminable. But thankfully, that general feeling of malaise soon passes. As January turns into February and the “stretch” begins to return to the evenings, a sense of optimism starts to develop.
And this year, as if to aid this process, the start of February brought with it some positive news for the Irish economy. First up, exchequer receipts for January 2015 were up by €460 million when compared to the same month last year. These figures included an increase of €58 million in income taxes when compared to January 2014. And the increase was despite the income tax adjustments which were announced in last October’s budget which took effect from the start of 2015.
The increase in the income tax take at a time when most people’s personal tax hit should have decreased can be credited partly to the increasing number of those returning to the work place. January marked the 38th consecutive month in which the Live Register figures decreased.
Ireland also continues to have the fastest growing economy of the 28 European Union member states. Growth projections for 2015 remain at around the 3.5 per cent level as estimated back in October 2014 at the time of our last Budget. These estimates are now strongly backed by the subsequent fall in the value of the Euro, which will be of particular benefit to those who export heavily to the US and the UK and for the Irish tourism industry, which has already benefited from the reduced VAT rate within that sector. In addition, it is hoped that the introduction of Quantative Easing by the European Central Bank should lead to an increase in demand which should bolster our growth figures further.
So all is rosy in the garden then? Well, not quite. If the economic turmoil over the last few years has taught us anything, it is that every silver lining has a cloud.
Despite the continuing reduction in the overall Irish unemployment rate, the number of those under 25 years of age who are unemployed actually increased in January and now stands at close to 22 per cent. As a result, we continue to run the risk of creating a “lost generation” suffering for the sins of their fathers.
Ireland’s domestic housing market also remains in poor order and the Central Banks’s new lending rules around loan to value will make it increasingly difficult for many to buy their own home. And news around growth rate percentage projections will be of cold comfort to the swathes of the population who will, as a result, be locked out of the market.
Our economic growth, though positive, has to be viewed in the context of Ireland’s open economy and how our path to recovery could be undermined by a downturn in the global economy to which we are highly exposed. And there have been some warning signs of late that economies within the Eurozone and across the globe could be about to face choppy waters.
That said, the omens for 2015 are positive overall and conditions now appear to be in place for a period of sustained growth. How this growth ultimately translates across the domestic sector will be interesting.