EXCHEQUER figures to be published tomorrow will show the healthiest position in more than years, with a strong surplus on current budget. A surge in tax venues in the last few months of year will boost the end year procedures and indicate trends which will given the Minister for Finance, Mr Quinn, substantial scope to reduce taxes in this month's Budget.
The precise size of the current budget surplus - the excess of day to day spending over revenue - will depend on the final movements of funds into and out of the Exchequer and will be calculated by Department of Finance officials today.
However, all the indications are that it will be at least £200 million, with some forecasters believing a figure of £300 million or more is possible. When capital borrowing of £650 million is taken into account, the overall level of Exchequer borrowing, forecast in last January's budget at £729 million, is expected to be in the £300 million to £400 million range. The low level of borrowing contributed to the fall in the national debt last year. In the last weeks of 1996 Government Departments are believed to have brought as much spending as possible forward from 1997 into last year. This would increase the recorded level of borrowing last year from what it otherwise would have been, but give more scope for this month's Budget.
Tax revenue last year ran more than 11 per cent ahead of 1995. With further strong growth expected in tax revenue this year, the Minister for Finance, Mr Quinn, has expected to have £300 million or more available to announce tax reductions on Budget day. A corporation tax package involving reductions of £30 million is expected.
The Government partners have still to discuss the precise shape of the Budget package. A reduction in the standard 27 per cent income tax rate is certain to form part of the package, although it is not clear whether the cut will be by one or two percentage points. This will partly depend on whether there is a cut in the standard employees' PRSI rate of 5.5 per cent.
There is strong support for a one point cut in this rate, but the Department of Social Welfare may hold out against such a move. A significant extension of the standard rate income tax band - and an increase in allowances are also expected.
New measures will be included to encourage employee share ownership and profit sharing.
On corporation tax, reductions in both the standard 38 per cent rate and the 30 per cent rate which applies to the first £50,000 of profits are expected. The latter measure will be aimed at helping the small firms sector.
