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Ireland says tax boost to cut 2015 deficit to 2.2%

Ireland says tax boost to cut 2015 deficit to 2.2%

DUBLIN: Ireland expects its budget deficit to fall to 2.2 percent of gross domestic product this year from an earlier forecast of 2.7 percent after the government’s tax take rose sharply, Finance Minister Michael Noonan said on Friday.

After the economy grew by over 5 percent last year, the best performance in the European Union, Noonan said he would be basing this month’s annual budget on GDP growth of 6.2 percent in 2015 and 4.2 percent in 2016.

That will allow the deficit to fall to about 1.5 percent in 2016, he said.

Noonan said he expects the country will collect around 2 billion euros ($2.2 billion) more tax than expected this year after surpassing its target by almost 6 percent at the end of September on the back of surging corporate tax and solid income tax and VAT receipts.

However the government will need to divert some of that to the struggling health service which is 324 million euros or 3.5 percent over budget already this year and has consistently overspent in recent years. Extra money may also be spent on transport in a “supplementary budget” later in the year.

“There have been overruns in some departments, so it makes sure that supplementary estimates can be covered out of increased taxes rather than by borrowing more at the end of the year,” Noonan told state broadcaster RTE.

Without that, Ireland would have further cut its deficit below the EU-limit of 3 percent. Davy Stockbrokers said its forecast for a deficit of 1.7 percent of GDP in 2015 would have been pessimistic if it was purely based on the tax figures and no supplementary spending was required.

Noonan also confirmed that the tax cuts and additional spending to be unveiled in the Oct. 13 budget will come in at the upper end of the 1.2 to 1.5 billion euros already flagged.