Half of the projected corporation tax for this year will be a windfall in nature and without it there would be a budget deficit, an Oireachtas committee has heard.
Minister for Finance Michael McGrath outlined to the Budgetary Oversight Committee that corporation tax rose by around 5 per cent last year compared to 50 per cent in 2022 “so there has been a very significant slowdown”.
Corporation tax is expected to reach €24.5 billion this year, an increase of just over 2.5 per cent on 2023. This will lead to a projected budget surplus of €8.6 billion this year. Taxation is expected to increase by 4.5 per cent to reach €92 billion.
Mr McGrath warned that the corporation tax receipts are “not linked to our domestic economy and could potentially be transient”.
The Government has set up two sovereign wealth funds to provide a “rainy day” fund for the future.
Inflation in April was 1.6 per cent which is one of the lowest rates in the Euro area and modified domestic demand (MDD), which is the preferred measure for the domestic economy, is seen increasing by 1.9 per cent this year. Next year MDD growth will accelerate to 2.3 per cent.
Mr McGrath was given evidence as part of the Stability Programme Update which was submitted to the European Commission on April 30th.
Independent Galway TD Sean Canney said there is a “huge gap in the market” in terms of private housing. There is only one private scheme happening in the whole county of Galway, he stated. “Every other developer who is buying a site goes to the local authority or a housing body to see if we can do with a deal with him because a developer cannot get the funding otherwise.”
The Minister for Public Expenditure Paschal Donohoe acknowledged that some private developers were unable to build homes for a price that the market would bear.
The State has stepped in to the fold in three ways, he told the committee – through schemes Minister for Housing Darragh O’Brien has introduced and through the help-to-buy scheme to give the private sector a greater reassurance that a deposit will be available. The third way will be through the shared equity scheme.
“We have far more progress to make and I have acknowledged that, but if you look at what we saw in the first quarter of this year with the number of planning applications and homes being completed, it gives me a degree of confidence that Government intervention will have a positive impact on supply.”
