DUBLIN (Reuters) - Ireland is working on a budget that will deliver 1 billion euros ($1.3 billion) of tax hikes and spending cuts next year and will revisit the “conservative” figure at the end of the month, a source familiar with the budget talks said on Thursday.
Ireland originally planned a 2 billion-euro adjustment in the October budget but after a string of positive economic data, finance minister Michael Noonan said this week that significantly less was now needed.
The government has not given a fresh estimate but the source said it was provisionally targeting half of the original amount before finalising plans after the last set of pre-budget tax returns are collected at the end of the month.
“We are working with a conservative figure of 1 billion and that will get revisited at the end of September,” the source told Reuters after the cabinet met for the first time since their summer recess this week ahead of the Oct. 14 budget.
Data on Tuesday showed that 1 billion euros or 4.1 percent more tax had been collected than expected so far this year. Some economists have said that if that momentum continues, the adjustment could be left at the 500 million euros already announced through the planned introduction of water charges.
Second-quarter gross domestic product data (GDP) will also be published before the government finalises its budget. The economy grew by 2.7 percent in the first three months and is expected to grow by 3.1 percent this year, a percentage point more than the government forecast in April.
The rebound in the economy will cut Ireland’s budget deficit to around 4 percent of GDP by the end of 2014, Noonan said on Wednesday, far better than forecast and closing in on the EU target of below 3 percent by the end of 2015.
Ireland targeted a deficit of 4.8 percent for 2014 at budget time last year, lower than the 5.1 percent required under the terms of its EU/IMF bailout completed in December, and the source said a small buffer would be “advisable” again this time around.
Editing by Andrew Roche