The Government published the “Medium-Term Fiscal Statement” last month for the purpose of providing a review of the economic progress made over the last year while at the same time highlighting the challenges that still remain.

According to the Statement there may be a marginal surplus in projected tax revenues for the year in the order of €0.2 billion. However, it is recognised in the Statement that November is the most important month of the year for tax revenues; a good performance in income tax, corporation tax and VAT is needed if the annual aggregate targets are to be achieved.

It is also re-affirmed in the Statement that an adjustment package combining revenue raising and expenditure reduction measures of just over €8.5 billion is required over the next three years if the annual deficit targets are to be achieved. A total of €3.5billion is required in 2013, €2.25billion from expenditure cuts and €1.25billion in revenue raising measures. A further €3.1 billion is needed in 2014 and €2billion in 2015.

With regard to possible tax changes, the Statement also notes that the primary focus will continue to be on the taxation of immobile assets rather than employment and that “the current Government policy is to maintain the current rates of income tax together with bands and credits, in keeping with the aim of re-invigorating the labour market” The introduction of a value-based property tax next year and further broadening of the personal income tax base which “may include the curtailment, reduction or abolition of a variety of income tax reliefs and a broadening of the PRSI base generally” is noted in the Statement.

The Statement also include a policy paper which reviews the impact of the 9% VAT rate introduced in last year's Jobs Initiative and whether the rate reduction had an impact on employment. According to the paper the 9% VAT rate had the desired impact both in terms of price pass through and employment; 3,000 additional jobs in the labour intensive food and accommodation service sector.

Another policy paper included with the Statement provides an update on the Common Consolidated Corporate Tax Base (CCCTB).

The full text of the Medium Term Fiscal Statement is published on the Department of Finance website. The individual policy papers are also available on www.taxpolicy.gov.ie.