The government does not budget for climate and health, according to Ifac

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The government is not adequately budgeting for climate change and healthcare reform while continuing to rely too heavily on corporate tax revenues, the Irish Tax Advisory Council (Ifac) has warned.

In its latest public finance assessment, the council praised the government’s recent budget, noting that it has found “an appropriate balance” between supporting the economy and keeping public finances on a sustainable path.

However, he said it was not clear how the state’s commitments on health and climate change fit into the government’s medium-term strategy “and whether sufficient resources have been allocated”.

He said the cost of halving Ireland’s greenhouse gas emissions by 2030 – laid out in the government’s climate action plan – had not been factored into current budget arithmetic.

“While a substantial portion of the national development plan’s investment spending could contribute to these goals, there could be significant additional costs for the state, particularly in encouraging the shift to electric vehicles and improving energy efficiency. houses, ”he said.

Sláintecare reforms

Likewise, with regard to health, the budget watchdog said that there is currently no clearly identified budget to continue implementing the Sláintecare reforms beyond next year “and there are no up-to-date estimates of the costs of implementing the remaining reforms ”.

“It is possible that the budgeted amounts are lower than what is required, especially for current spending needs,” he warned.

The government’s budget forecasts through 2025 suggest that it will have around 1.6 billion euros per year for additional spending measures on top of the increases already committed in its current and investment budgets.

The council estimates that around 1.1 billion euros will be needed just to maintain the current level of services and benefits, what it calls “the costs of the status quo”. Only € 500 million remains for climate change and healthcare reform.

“The space available to fund new current spending initiatives on a sustainable basis each year without raising taxes or reducing other spending is very limited,” he said.

Council President Sebastian Barnes said the government must now clarify how the costs of Sláintecare and the new climate action plan will be financed in a sustainable manner.

Corporation tax

In its report, the budget watchdog also highlighted the government’s continued dependence on corporate tax revenues, noting that revenues have become more concentrated with just 10 large corporations accounting for 56% of all revenue in the world. corporate tax last year.

“The concentration of corporate tax revenues, coupled with their volatility and vulnerability to international tax developments, is a source of serious concern,” he said.

The council recommended that the government direct any other excess corporate tax revenue, including increases due to the increase in the minimum corporate tax rate to 15 percent, to a new fund for corporations. rainy days.

“The rainy day fund has been absent from recent budget releases, but could play an important role in reducing the government’s current over-reliance on corporate tax revenues,” he said. Previous plans for such a fund, first proposed in 2016, never saw the light of day and were later scrapped with the onset of Covid-19.

Regarding the economy, Ifac said that “growth could be higher if the scars of the pandemic turn out to be less severe than expected, if wages increase more quickly or if a drop in savings increases spending. consumption more than expected in 2022 ”.

However, he said the potential for viral mutations and new restrictions to handle the pandemic “weigh on growth prospects.”

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