Cowen keen to check inflation, close loopholes in new Budget

The Minister for Finance, Mr Cowen, has said avoiding inflationary pressures will be a key component of his approach when framing the Budget.

Speaking at a Leinster Society of Chartered Accountants lunch in Dublin, Mr Cowen also said that a responsible approach to taxation schemes on the part of tax practitioners would pay dividends for the State, the accountancy profession and the Exchequer.

"Like my predecessor, I will act firmly to close tax loopholes and artificial tax planning schemes to protect the revenue base and our reputation."

Mr Cowen said he was not going to reveal details of his budgetary strategy.

"What I will say, however, is that my approach to budgetary policy is grounded in my conviction that we must protect our competitiveness and that one way to achieve this is to avoid adding inflationary pressures which give rise to wage demands and set in train a vicious cycle for the economy."

Speaking later to the media, Mr Cowen said there was a need to maintain a "pretty tight position going forward" with the public finances.

There was speculation that Gross Domestic Product (GDP) could grow 4.7 per cent this year and it was important not to "add fuel" to such a growth rate.

It was necessary to ensure that the potential for the economy to continue to grow at 5 per cent in the future was maintained.

He said competitor economies were looking at Ireland and learning from it.

"Complacency is probably the greatest danger to sustained economic growth."

Asked if his would be a giveaway Budget, he said there was a need to find a balance and that "not everything can be a priority".

Considerable investment had been given to social services and there was a need to deliver on that investment.

Asked about his view on tax reform, he said that since 1997 an extra €6 billion has been spent on "tax relief for workers". During the same period, an extra €17 billion has been allocated to public services and €4 billion to capital investment.

There had been unprecedented investment in public services and what was needed now was for the public to see some result from that investment, the minister said.

He said it had been agreed with the social partners that there would be an attempt to assist those at the lower end of the income spectrum.

With non-recurring tax income coming from areas such as the Revenue's special investigations activities, it was important that such non-recurring revenue became part of the "base going forward".

The current bouyancy in tax revenue was there because the economy was doing well and it was essential to ensure that that position was maintained.

On tax schemes, he said he did not object in principle to tax incentives that led to investment in areas that might not otherwise receive it.

However, such schemes needed constant review in case the gain from the schemes was not commensurate with the loss to the Revenue.