Today’s exchequer figures finally nail the lie that the Irish economy has turned a corner towards recovery. In only the first two months of 2010, tax revenue is already down over €1bn on last year and the deficit has shot up €323m, from just under €2.1bn at end February 2009 to over €2.4bn now.
Today’s numbers will come as a hammer-blow to an increasingly shaky government.
Income tax and corporation tax both are way below profile.
There are few indications so far in 2010 of any the fabled green shoots that featured so much in Ministerial speeches last year. The sad, raw truth is that Ireland was first into recession and, based on these figures, seems likely to be the last out.
No corner will be turned until resolute action is taken to get Ireland back working. The government’s slash-and-burn approach, with hardly a thought to stimulus or job creation, is turning out to be self-defeating.
Today’s announcement that Allied Irish Bank recorded a €3.5bn loss on its Irish operations in 2009 carries significant implications for tax revenues. Any corporation tax paid by AIB for 2008 may well be refunded, while the bank can carry forward its mega-losses as a tax write-off against future profits. The upshot of this is that AIB, and all of our domestic banks for that matter, is unlikely to pay tax for a long time to come.
Thus, the most important index of Ireland’s economic woes today is not the Exchequer Report but rather the AIB Report and its blunt message that ever larger tranches of public funds may be needed to recapitalise it and other banks.
What a contrast that situation is with the repeated assurances from Ministers all through last year that the bank rescue would cost taxpayers nothing at all.
Today’s exchequer figures reveal again the increasing burden of interest payments on the national debt. The February 2010 interest figure, at €338m, is €163m up on last February’s figure of €175m. Note that this €338m interest cost is nearly three times the corporation tax take of €107m. It completely dwarfs the combined receipts from capital taxes such as CGT, CAT and stamp duty.