Dáil Éireann Debate, Tuesday - 16 October 2007
116 Deputy Martin Ferris asked the Tánaiste and Minister for Finance his views on whether his Department failed to recognise the expected extent of the impact of the much anticipated downturn in the property and construction sectors on tax receipts. [23656/07]
View answer131 Deputy Arthur Morgan asked the Tánaiste and Minister for Finance his views on whether the failure of his Department to recognise the extent to which the economy was over dependent on the construction sector has meant that the Government was ill prepared for the consequences for the Exchequer of the contraction which is currently under way in that sector. [23652/07]
View answerI propose to take Questions Nos. 116 and 131 together.
The relatively high level of new housing investment as a percentage of GNP in recent years reflects the increase in the housing stock that was required to address the demand for housing. Ireland still has a housing stock below the Western European average. At Budget time, my Department did anticipate an easing in new housing output from the very high rates of completions last year. While the actual slowdown is now larger than initially anticipated other components of construction continue to do well.
While tax revenues from Stamp Duties and CGT have made an increasing contribution to the Exchequer in recent years, it is important to put that contribution in context. The Budget forecast of yields from Stamp Duties and CGT in 2007 together represent about 15 per cent of tax revenues overall. In contrast the main four taxes (Income Tax, VAT, Corporation Tax and Excise Duties) together account for about 84 per cent of expected revenues this year. Overall, the four main taxes are on target.
Care has been taken not to plan the public finances around the assumption that tax receipts from the property and wider construction sector would continue to grow in future years as they have done previously. The 2007 forecasts for Stamp Duties and CGT together assumed only a modest increase over their 2006 outturn on the basis that the property market would begin to ease back to more sustainable levels of growth.
It now looks likely that overall tax revenue will be about 2 percent below the Budget Day target. This shortfall will be offset to some extent by savings of about €500 million in other areas such as Central Fund expenditure and higher than expected non-tax revenue. An Exchequer deficit of up to €1 billion now seems likely at end year. In addition a General Government surplus, the tenth out of the last eleven years, is anticipated for this year.
