Oireachtas Joint and Select Committees
Wednesday, 22 September 2021
Committee on Budgetary Oversight
Pre-Budget 2022 Scrutiny: Irish Fiscal Advisory Council
I thank Mr. Barnes and his team for the presentation. I want to talk about tax buoyancy and the forecasts. Mr. Barnes's opening statement and the pre-budget statement published by the council last week focused on what could be described as a robust and quick recovery of the economy as restrictions ease and normal economic activity resumes. He said the council has developed a recovery scenario which differs from the macroeconomic projections in the SES. He described those as not being fully updated and not consistent with the Government's fiscal plans.
The council's recovery scenario sees modified domestic demand, which we know is a better measure of economic activity than GDP, rebounding faster than the projections in the SES. We also know that tax receipts returned to the Exchequer signalled a strong recovery with tax heads such as VAT, income tax and corporation tax coming in above profile. What accounts for the difference between the scenario outlined by the council and that in the SES? Is it the view of the witnesses, given the outdated projections in the SES which feed into the tax and fiscal forecasts, that tax revenue is likely to be higher and, therefore, deficits lower this year and in 2022?
In his statement Mr. Barnes outlined that the deficit will drop from a projection of about €20 billion this year to in the region of €15 billion. Can he give us any indication of what he thinks the position will be in 2022 as a result of those dynamics? Has the council developed its own projections to reflect the strong recovery? What is the view of the council in terms of how the Government should respond to such tax buoyancy? In other words, should any revision in tax revenue upwards in the Government's October forecast be committed to additional spending measures, used for tax cuts or used to improve the fiscal position?