OREANDA-NEWS. The Central Bank of Ireland today publishes a new Economic Letter entitled Government Revenues in Ireland since the Financial Crisis.

The Letter analyses recent trends in tax and non-tax revenues, and discusses conclusions that can be made from these trends. The key findings of the analysis are as follows:

  • The public finances are benefiting significantly from higher income tax receipts. Relying on more stable tax heads such as income tax – rather than cyclically sensitive ones - is desirable from a public finance perspective and removes one of the key vulnerabilities that developed in Ireland in the mid-2000s.
  • Non-tax revenues have increased sharply, from €0.6 billion in 2007 to €3.0 billion in 2014. These increases are due to a number of factors, including: profits remitted to Government by the Central Bank of Ireland; interest income; and bank guarantee fees. Relative to the EU, Ireland is now collecting very significant amounts of income from non-tax related sources of revenue.
  • Non-tax revenues have consistently exceeded Budget expectations since 2007, producing ‘unexpected revenue gains’. Given that a large portion of the increase in non-tax revenue has resulted from support the Government has provided to the financial sector – a process that has significantly added to the Government debt to GDP ratio – there would appear to be a compelling case that these gains be used to reduce the government debt.
  • The overall stock of government debt remains high and needs to be reduced to safer levels. Actions that reduce public debt would also create more fiscal space in the event of a future negative economic shock.