Dáil debates

Tuesday, 26 June 2007

3:00 pm

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

Question 75: To ask the Tánaiste and Minister for Finance if he had reason to revise his forecast for tax receipts in 2007-08; and if he will make a statement on the matter. [17744/07]

Photo of Brian CowenBrian Cowen (Minister, Department of Finance; Tánaiste; Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

Exchequer tax receipts to the end of May were, at €18.603 million, just €19 million or 0.1% below profile. They were 9.6% up on the same period last year. This compares with a budget day target of an increase of 7.8% for 2007 as a whole.

While overall tax receipts were almost exactly on target at the end of May, there are some variations under particular tax heads: corporation tax receipts are €221 million or 17.5% above profile; customs receipts are €4 million or 3.6% above profile; VAT receipts were €28 million or 0.4% below profile; income tax receipts are €56 million or 1.1% below profile; excise duties were €120 million or 4.7% below profile; stamp duties were €16 million or 1.1% below profile; and capital taxes were €71 million or 5.8% below profile. Of these, capital gains tax was €79 million or 7.2% below profile and capital acquisitions tax was €8 million or 5.1% above profile.

Given the significance of tax payments in the latter part of the year, it would be unwise to attempt to draw conclusions about the performance of the economy based on tax receipts at this early stage. The latest available economic estimates show that the economy continues to perform well. Preliminary CSO data for 2006 as a whole indicates that GDP growth was 6%, while, in GNP terms, the growth rate in 2006 was estimated at 7.4%.

In the circumstances, I do not see a need to revise our forecast at this stage. However, my Department monitors tax receipts on an ongoing basis and, as more data become available, any significant changes to the expected end of year receipts will be signalled once the position becomes clear.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

Is the Tánaiste aware that the data relating to housing starts suggest that they are 30% down on their peak? Commentators for Davy have indicated that this could lead to housing completions falling from 95,000 to 65,000. Do I infer from the Tánaiste's reply that he sees such a fall-off in housing activity as having no impact on tax revenue? Has he considered the likely impact of such a fall in housing construction on employment in the sector? Davy suggests that as many as 28,000 jobs could be lost in the construction sector as a result of the decline in activity. Does the Tánaiste believe that Exchequer revenue will be immune to this decline or is he of the view that the data relating to housing starts are wrong?

Photo of Brian CowenBrian Cowen (Minister, Department of Finance; Tánaiste; Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

Housing market activity impacts primarily on VAT, stamp duty and capital gains tax. It also impacts on income tax and PRSI receipts and corporation tax from construction sector company profits. While revenue from housing market activity, such as that relating to stamp duty and capital gains tax, has made an increasing contribution to the Exchequer in recent years, we are not overly reliant on receipts from this source. Taken together, for example, the stamp duty and capital gains tax heads are forecast to contribute approximately 15% of total targeted tax revenues in 2007.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

I did not inquire about that matter.

Photo of Brian CowenBrian Cowen (Minister, Department of Finance; Tánaiste; Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

It is worth noting that a significant proportion of receipts from these tax heads comes from sources other than residential property.

On housing starts, a correction has been taking place in the market since last autumn. This has resulted in an easing in house price inflation. The latter is a welcome development because continuing double digit house price inflation would not be sustainable. There is also the question of trying to ensure that we achieve a soft landing for the housing sector, particularly in view of the fact that the Central Bank and Financial Services Authority of Ireland, the ESRI and others forecast over a period that there would be a reduction in housing starts and completions to a level of approximately 65,000 to 70,000 per annum in the next few years.

We need to ensure there is stability and certainty in the market. That is one of the reasons we have decided to bring legislative proposals before the House this evening. We want to maintain confidence in the housing market. The question before the House relates to the impact on revenues. At this stage, we do not think there is any reason to believe we will be below profile in our overall tax receipts, under all the tax heads. We will continue to monitor the situation.

Photo of Richard BrutonRichard Bruton (Dublin North Central, Fine Gael)
Link to this: Individually | In context

The Tánaiste has not answered the questions I asked. He devoted most of his time to answering questions which were not those I asked. Davy, which is not regarded as reckless, has indicated that tax receipts in 2008 will decrease by €1.3 billion on the basis of the existing figures for housing. Does the Minister intend to stick his head in the sand, like an ostrich, by pretending that is not happening, or will he try to anticipate the impact of the predicted decline on public financial planning? That is the question I would like him to answer. He seems to be pretending that it would be unwise at this stage to anticipate such a fall. That suggests that he believes such a reduction will not happen, or that he believes such a reduction will have no impact. There is no sound basis for either belief. How will the Minister cope with the likely decline in revenue of over €1 billion in 2008? What impact will such a decline have?

Photo of Brian CowenBrian Cowen (Minister, Department of Finance; Tánaiste; Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

In the past, returns in this area have exceeded those which had been forecast. Such forecasts were not based on windfall gains. There continues to be a prospect that our estimates will come in on target, even if there is a downturn.