Wednesday, September 18 11:31:55
With Ireland's economic outlook still uncertain, left-leaning economic think-tank, NERI, today said that the Budget 14 adjustment should be no more than E2bn rather than the E3.1bn slated by the Government.
Its pre-Budget submission said that the Government could afford to abandon spending cuts by raising additional income tax from the top 10pc of households.
In its latest Economic Quarterly Observer, the trade union-backed think-tank noted recent improvements in economic data, particularly the increase in employment, but said the economic outlook remains uncertain.
NERI said the Budget should be restructured to hit deficit reduction targets without additional cuts in spending.
It said a E2 billion adjustment would be sufficient, comprising E1.65 billion in extra tax and the E350 million in savings from the Haddington Road Agreement.
NERI highlights an uncertain economic outlook in the Republic of Ireland where there are mixed signals pointing towards stability, even tentative recovery, alongside concerns on export growth, domestic demand, continuing long-term unemployment and declining GDP. The institute predicts modest growth in GDP and employment over the next four years.
Commenting on the publication, NERI Senior Researcher Dr Micheal Collins pointed out that "there are choices open to Government and it is possible to pursue a jobs-friendly, growth-friendly and equality-friendly fiscal adjustment".
The report said Budget 2014 could raise an additional E400 million from households in the top 10pc of the income distribution (above E109,000 gross income per annum).
Currently the top 10pc of households have an average effective tax rate of between 22.5pc and 27.5pc (overall average 25.6pc).
A 1.5pc increase in this rate would raise E400m in a full year, equivalent to an average of E46 in additional income taxes per household per week, NERI said.
The spread of income within the top decile suggests that these increases should be designed to be progressive; those within that decile with higher income should experience a greater increase than those with a lower income, it said.