The Department of Finance of Ireland has released its national Exchequer Statement for the first five month of the 2011 calendar year. The latest publication shows that in the five months of 2011 tax revenues in Ireland grew by 5.6 percent if compared to the same period in 2010.

By the end of May Irish tax authorities had received EUR 12.8 billion in overall tax payments. The collections were 0.5 percent below the government’s previously determined target, but EUR 678 million above receipts for the same time period last year.

The overall tax revenues in Ireland were comprised of EUR 5 billion in personal income taxes, EUR 4.9 billion of Value Added Taxes (VAT), EUR 599 million in corporate income taxes, EUR 1.8 billion of excise duties, and approximately EUR 476 million in other taxes. According to figures published in the Exchequer Statement, national collections of VAT fell by 1.9 percent, resulting in a EUR 92 million shortfall in profits, corporate income tax revenues for the period dropped by 10.4 percent, resulting in a EUR 70 million loss of government revenues.

Despite the overall growth of tax revenues, the government of Ireland still saw its budget deficit rise from EUR 7.86 billion to EUR 10.2 billion. The increase is attributed to the government’s recent EUR 3 billion bailout of Anglo Irish Bank Corp and Irish Nationwide Building Society, which have been experiencing significant financial trouble since earlier this year . Local analysts forecast that the deficit will not see any more significant increase throughout the year, barring any unforeseen events.

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On February 15th Eamon Ryan, former Minister for Communications, Energy and Natural Resources of Ireland, released a statement claiming that a small tax should instated on the usage of internet in Ireland. Eamon Ryan is campaigning as a Green Party candidate in the 2011 general elections, and the tax overhaul will be one of his campaign platforms.

According to Eamon Ryan, the tax treatment of media technology in Ireland is obsolete, ineffective and suffers from excessive bureaucratic processes. Speaking on behalf of the Green Party, Eamon Ryan suggested that the tax overhaul should begin with the abolishment of the current television license levy. The revenues lost through the move would be compensated with the new internet tax, which would be levied at a very small rate directly on the taxpayer’s data usage.

The former Minister claimed that the tax would be far easier to collect and impose on users, compared to the current television license. He added that the inherent costs of collecting a tax on internet usage would be lower than those associated with the present license fee. The revenues raised from the tax would be used to aid funding for public sector broadcasting. Eamon Ryan suggested that the money would be highly beneficial to news outlets across all media sources in Ireland, and would be allocated in an impartial manner to all applicants.

Eamon Ryan claimed that it was critical that the system be in place by the end of the next government’s term. He added that before the any such tax is put into place, the Green Party would facilitate an open consultation across all industry sectors which could be affected by the proposed change.

The Fine Gael political party has already responded to the Green Party’s suggestion, releasing a similar proposal whereby television license fees will be removed and replaced with a flat tax which would be charged on yet to be defined “devices which can access content”.

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On January 5th the Department of Finance of Ireland released the 2011 Analysis of End Year Tax Receipts, which summarizes the country’s tax revenue results for the 2010 calendar year. The publication shows that over the period total tax revenues reached EUR 31.75 billion, approximately 2.3 percent (EUR 703 million) above the Government’s own revenue estimates. However, compared to the 2009 calendar year, collections for 2010 had dropped by 3.9 percent.

Personal income tax collections were the largest contributors to annual tax revenues, reaching EUR 11.28 billion, 2.2 percent below official forecasts. Conversely, corporate income tax revenues were an unexpected 24.2 percent above estimates, reaching a total of EUR 3.9 billion. The level rose above that seen in 2009, by approximately 0.6 percent. While discussing the revenue figures on the day of the release of the report, the Minister for Finance Brian Lenihan attributed the growth in corporate tax revenues to an unanticipated recovery in the export sector. Excise tax and Capital Gains Tax were also revealed to have risen above expectation, by 3.6 percent and 2 percent respectively. Value Added Tax (VAT) revenues were in line with official predictions, reported at being only 0.1 percent above estimates, at a total level of EUR 10.1 billion.

During the press conference Brian Lenihan commented on the overall results, saying, “…it is to be welcomed that three of our big four tax heads – VAT, excise duties and corporation tax – performed above expectations.” He added that the positive movements “are real grounds for optimism about the Irish economy.” The Minister also said that the weaknesses in the final tax receipt results developed early on in 2010, and had not grown throughout the year, adding further credence to the idea that the economy is stabilizing.

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On November 1st Sinn Féin officially released its pre-budgetary plan, which outlines the party’s own proposals for the December national budget announcement. Sinn Féin claims that the new economic ideas stipulated in the plan could stimulate long-term growth in the economy while efficiently addressing the budget deficit. Among its many suggestions, the pre-budget plan calls to instate a third personal-income tax bracket, which will be effective on earnings in excess of EUR 100 000 and be levied at a rate of 48 percent. It is estimated that the measure would raise an additional EUR 410 million annually. A wealth-tax was also proposed, which would see all assets valued at over EUR 1 million be levied at 1 percent annually. Alterations to national discretionary tax relief schemes will also yield approximately EUR 1.1 billion annually.

Additionally, the proposal lists a series of non-taxation measures aimed at economic improvement, including a concentrated effort to minimize wasteful government spending, which could save almost EUR 1 billion before 2016. The budgetary package also includes EUR 7.6 billion of stimulus measures, which should spurn Ireland into renewed levels of economic growth.

Gerry Adams, president of Sinn Féin, admitted that his proposed budget will result in some initial “drag” on the economy. However, in the long-run the implementation of the party’s pre-budget plan would restore the country to its “Celtic Tiger” days.

Sinn Féin’s proposal was issued in anticipation to the current government coalition’s budget plans, which is scheduled for release in December. The presently ruling coalition is expected to instate over EUR 4 billion of public spending cuts in order to decrease severe national budget deficit. The Government has assured the European Union that it will lower the deficit to 3 percent of the GDP by 2014, and will not require economic assistance in the foreseeable future. However, the Sinn Féin has openly contested the rationales behind the promise and the anticipated budget plans, saying that they will ultimately lead to further economic decline in Ireland.

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Speaking in New York on October 10th Brian Lenihan, Finance Minister of Ireland, revealed that in the face of the December budget announcement the Government is inspecting all possible fiscal options and adjustments to reduce its budget deficit. Cuts to welfare payments and pensions were specifically mentioned, along with possible increases to some tax rates and broadening the sources of tax revenues. The Government has previously shied away from altering tax policies to reduce the budget deficit, opting instead to cut public service employee wages by 14 percent. However, the Minister admitted that Ireland has “real fiscal and banking problems to address” and that the country’s deficit balance was worrying. Although Brian Lenihan did say that with its willingness to inspect all possibilities for deficit reductions the Irish government will definitely not require fiscal assistance from the International Monetary Fund (IMF) or the EU in the near future.

To ease the worries of multinational companies based in Ireland, Brian Lenihan issued assurances that the country’s 12.5 percent corporate tax rate would not be altered. While the rate is still far below that seen across Europe, it is feared that even a slight upward adjustment will see a number of multinationals relocating out of Ireland. However, the Minister did say that taxes “will have to play some part” in narrowing the deficit, leading analysts to suspect that tax allowances granted on pension and welfare payments will definitely be altered. The country’s income tax base will also be expanded, to include a greater number of low-income workers, who currently enjoy no income tax liabilities.

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