The economic downturn has seen an acceleration in the rate of job losses. We now have more than one in ten adults signing on the dole and the Taoiseach predicted that this could increase to well over 400,000. As a result, less tax revenues are coming in and more social welfare payments are going out.

Income tax receipts are down substantially in the first two months of the year despite the introduction of the 1 per cent income tax levy. Capital gains tax, stamp duty, corporation tax and VAT receipts were also all down. The Minister for Finance, Brian Lenihan, stated that this is a very serious situation for the country, as the Government had set itself a definite limit on borrowing for this year, which it has to stick to.

As a consequence the Government will introduce a supplementary Budget in the first week of April. This Budget will aim to tackle the current projected shortfall of between €4bn and €4.5bn this year. It will contain details of new spending cuts and taxation measures to address the shortfall and to stimulate businesses. It is expected that the budget will not only address the falling tax revenues, but contain a wider plan for economic recovery in the future. The Taoiseach has said the measures 'will not be painless' but the Government would take them no matter what the immediate consequences.

A party spokesman has been quoted as saying that the Government's approach would include such measures as increasing the lower and upper rates of tax by 1 per cent, a possible new top rate of tax for those on very high incomes, the introduction of a carbon tax designed to raise an additional €800 million a year, increased excise duty on cigarettes and alcohol, a reduction in non-core spending on the capital programme and cuts on non-essential current spending.

Workers are therefore expected to feel the brunt of the Budget as they will be hit with across-the-board tax hikes and major cuts in public services. Mr Lenihan has expressed his view that the exclusion of 40 percent of the workforce from the tax net was something that would have to change. He said that those in the tax net would have to pay more but everyone would have to pay something. He also did not rule out cuts in social welfare payments stating that if the cost of living continues to increase, it will not be possible to provide for social welfare increases.

The Taoiseach said the world economy was facing the biggest crisis since 1929. Mr Lenihan has said that "The future economic viability of this country is at stake," he said, calling the situation "one of the most daunting challenges to face any Government since the foundation of the State". The Government has invited the opposition parties to make detailed submissions on what should be contained in the upcoming emergency Budget.

We can only hope that this time out the measures introduced by the Government will adequately provide for the expected shortfall over the remainder of the year and that no further mini Budgets will be required.

For further information contact Clodagh Hegarty or Claire Scott at Carlin McLaughlin & Co., The Business Centre, Lisfannon, Buncrana, Co. Donegal. T: +353(0)74 9364200 E:info@carlinmclaughlin.ie