Trust economists to throw a damp towel on what should be a good period for the put-upon Irish consumer. Just as we are easing out of the latest lockdown, along comes the Economic and Social Research Institute (ESRI) to tell us that all that hardship we have just endured over the last 14 months may be coming to an end – but there will be a big bill to be paid.
n truth we may have suspected this was the case. But just like the Government has been telling us, we convinced ourselves it would all sort itself out.
Cue a reality check from the economists in the ESRI.
And to be fair someone had to be brave enough to say the 25pc surge in State spending between 2019 and this year was never going to just disappear down some hole in the Department of Finance’s Merrion Street offices in Dublin.
Add in the expected hit to corporation tax from changes coming down the line, and less revenue from motor tax as e-vehicles multiply on the roads, and the State coffers are not looking so healthy in the years ahead.
An ageing population and higher health spending are adding to the situation. Spending commitments in the last budget added €5bn to non-Covid expenditure.
It all has to be faced up to and it looks like the punter, as always in this country, will be asked to pony up.
One option to balance the State’s budgets would be to put in place massive cutbacks, but this would be politically unpalatable.
“It therefore seems likely that there will be some need for sizeable tax increases in the years ahead,” the ESRI’s Barra Roantree and Theano Kakoulidou argue in a research paper.
So it looks like we are getting a flurry of painful tax rises that will hit everyone in the pocket hard.
The timing is terrible. Just as the economy gets going again, the ESRI says we have to consider tax rises.
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The ESRI paper does not advocate any particular tax measure, instead setting a range of revenue-raising options. But it does point out that our best bets for raising revenue are to consider income tax rises, pushing up the highest rate of VAT, and getting more from the property tax.
It says there are various problems with raising money from corporation tax and from the likes of wealth taxes. Most wealth in this country is tied up in property, it points out.
The only good news is that the tax hikes are not needed immediately, and can be put in place over the next decade.
That is just as well because there is no sign of the pressure on the public purse easing. More will have to be spent on housing, and who knows what the eventual bill will be for the HSE cyber attacks?
The ESRI is doing us a favour, even if its timing is unfortunate, with the virus seemingly in retreat.
The economists are warning us to brace for more tax in the next few years. Difficult decisions lie ahead for this Government and the next.
As ever, Joe and Mary Public are being told they need to stump up more of their hard-earned and in return they will get less from the State. That will not go down well during a wet May in the second year of a pandemic.