‘Reduce national debt with any corporate tax windfall’ – Central Bank
The Acting Governor of the Central Bank has urged the Minister for Finance to use any unexpected windfall in corporate tax this year to reduce the national debt, which stands at just over €200 billion.
In a pre-Budget letter to the Minister published today, Acting Governor Sharon Donnery has warned that the reduction of Ireland’s very high level of public debt must remain a ‘key priority’ for the Government.
In recent years, high growth rates and low interest rates have made the national debt burder more manageable, but Ms Donnery has warned this benign situation is unlikely to last.
She has urged the Government to use any unexpected windfall from corporation tax receipts this year to pay down debt. The Bank argues that it would make it easier for the Government to spend its way out of any future downturn or shock, like a disorderly Brexit.
Referring to the potential fiscal effect of a disorderly Brexit, she said such a situation would lead to a material deterioration in the fiscal position, and that this assumes “automatic stabilisers are allowed to operate fully, as would be appropriate”.
She added”any fiscal response to Brexit must be consistent with long run debt sustainability and does not undo the hard work in re-establishing Ireland’s fiscal credibility and risk the emergence of unsustainable debt dynamics”.
The Bank has also advised that the Government formalise a lower target for our national debt and aim to get there at a quicker pace than that dictated by EU rules.
The Bank has also advised that the Government formalise a lower target for our national debt and aim to get there at a quicker pace than that dictated by EU rules.
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