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July 27, 2007




A few further points;

Davy's have suggested that Govt. tax yield will be down by approx. €1,200M. My own figures as you are aware come in around €1,100M. They for example expect excise to come in on target where I expect the excise figure to be about 5% off as it is for the first 6 months. If you factor that figure in, then their tax figure would come in over €1,500M.

Davy's also expect a $ v € rate of around $1.40 by year end and for 2008. Davy's correctly point out that many multi nationals based in Ireland trade mainly within the group itself. However many of these companies are paid in dollars but incur their costs in Euro. This will reduce their CT payments as profits will be less.

However the most worrying is a growth rate of say 3%, will mean the tax growth in 2008, from a lower 2007 base, will be at least €3,000M short of the assumptions made in the FF manifesto. But if there is a weakness in building then the tax yield will be reduced by more because of our dependence on once off transaction taxes, e.g. stamp duty, VRT and VAT on housing.

This leaves the Government dependent on consumers continuing to borrow on short-term credit to spend.

Any change in spending habits will hit hard.

Could taxes be down up to €5,000M from target? Which promises will be forgotten and how will the punters take tax rises?

Finally Davy's expect two further interest rate rises in 2007. There is no sign of any slowdown in Germany, (other than in construction!) and it is hard to see the interest rate declines being predicted by Dan McLoughlin. I think we may find that Robbie Kelleher is being slightly too optimistic by the middle of 2008.


Niall, certainly Davy is predicting a significant Exchequer deficit by the end of 2008. The government will point to the General Government Balance but this is a smokescreen as the central government's finances are determined by the Exchequer finances. A responsible government would abandon their tax cutting nonsense but what odds on that with this government. When the Exchequer statement comes out in a couple of weeks I'll roll the numbers in a post.

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