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Budget to mark end of austerity era in Ireland

[Dublin] Ireland will depart from six years of deep austerity on Tuesday as Dublin delivers its first post-bailout budget, with changes to corporate tax rules also expected in the wake of an Apple probe.

Last December, Ireland became the first eurozone country to exit a rescue programme three years after turning to the European Union and International Monetary Fund for emergency cash.

Successive Irish governments since 2008 have taken 30-billion-euros (US$38.06 billion) from its struggling economy in spending cuts and tax hikes - roughly 18 per cent of gross domestic product.

But in recent months, unemployment has fallen and growth has returned.

The economy expanded by 7.7 per cent in GDP terms in the first six months of this year, the fastest growth since 2007.

Now Dublin must manage expectations from austerity-fatigued voters, who have borne the brunt of the cutbacks.

Prime Minister Enda Kenny has warned the budget cannot be a "blank cheque" but would, he hoped, "maintain the success and spread the benefit." Under EU guidelines, Dublin is committed to achieving a deficit of under 3.0 per cent of GDP in the public finances next year.

The latest official estimates predict a deficit of 2.4 per cent of GDP in 2015 without any further adjustment, mainly because more people are returning to work.

"It's the end of the period where the Irish people can expect swingeing cuts and massive tax increases," Stephen Kinsella, lecturer in economics at the University of Limerick, told AFP.

While Dublin may have expected the focus to be on recent successes, it has found itself under increasing pressure to address its corporate tax regime.

A cornerstone of Ireland's economic policy, corporate taxes are again under attack after the European Commission announced it was investigating Apple's tax arrangements in Ireland.

The US tech giant paid as little as 2.0 per cent tax, despite a 12.5 per cent headline corporation tax rate, with the Commission taking the preliminary view that the arrangements gave Apple an unfair advantage, the equivalent of illegal state aid.

Finance Minister Michael Noonan is expected to announce changes to the tax regime in his budget speech, experts said.

He is likely to signal the closure of a tax loophole, known as the "Double Irish" - a method of shifting profits through Ireland to a low-tax haven to minimise tax.

Kinsella said there would be "a very strong signal that the Double Irish and other tax practices like it are on the way out," but added: "They'll be phased out gently". AFP