Medium Term Fiscal Statement Published: €1.6bn tax cuts and €2.2bn spending cuts for 2012
November 08 2011
Last Friday, 4th November Minister Noonan announced the Medium-Term Fiscal Statement which is the first stage in a sequence of budget-related announcements that will lead to Budget Day, 6 December 2011. This Statement sets out a year-by-year timetable of how this consolidation will be phased, starting with the €3.8 billion adjustment that is now planned for 2012. €1.6bn of the adjustment will be achieved through tax measures, and the remaining €2.2bn will come from spending cuts.
The following includes extracts from the Minister’s statement:-
 No substantial changes to Income tax for 2012.
 Continued commitment to the 12.5% Corporation tax rate.
 Indirect taxes including VAT increases are being examined as a revenue source for Government to meet these targets.
 The tax system is to be redesigned of which it is the Government’s intention to release a tax strategy for the next 3 years (2013-2015) on Budget Day.
 The economy has returned to growth. The Government’s strategy is to return the public finances to a sound position and thereby create the essential conditions for strong and sustainable employment growth.
 It is estimated that to close the gap between tax and spending will necessitate adjustment measures amounting to a total of €12.4 billion over the 4-year period 2012-2015. [€7.75bn spending cuts & €4.65bn increase in tax revenues].
 The likelihood is that exports will remain the only significant source of positive momentum in the economy for the next couple of years. That being the case, safeguarding and expanding the economy’s export base will remain a critically important objective of overall economic strategy.
 It is essential that domestic demand recovers. Indeed, it is only when consumer spending and investment start increasing again, that appreciable, broadly-based employment growth will re-commence. The restoration of business and consumer confidence is a pre-condition for this renewed growth.
 GDP is now projected to grow by 1.6% in 2012 and at an average annual rate of 2.8% over the following three years. A key reason for the downward revisions is that the outlook for the global economy has deteriorated in the intervening period. It is worth noting that the most recent OECD forecasts for the Euro Area as a whole see GDP growth of 0.3% in 2012 and 1.5% in 2013.
 The Government is committed to ensuring that the measures taken are as jobs-friendly as possible.
