Irish Economy
Irish Exchequer Returns: Deficit at end-April 2011 was €9.9bn; Debt servicing of national debt cost €1.8bn
By Finfacts Team
May 4, 2011 - 5:02 PM

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Irish Exchequer Returns: The deficit at end-April 2011 was €9.9bn compared to a deficit of just under €7bn in the first four months of 2010 and was in line with Department of Finance expectations. Debt servicing of national debt cost €1.8bn

The year-on-year increase in the deficit of just under €3bn was primarily due to the €3.06bn in payments to Anglo Irish Bank and INBS in March which relate to the first installment of the Promissory Notes committed to the failed institutions in 2010.

Tax revenues at end-April, at €9.6bn were €606m or 6.7% up on the same period in 2010. Year-on-year increases in income tax - - primarily due to the introduction of the USC (Universal Service Charge) and other Budget 2011 measures - - and excise duties offset minor year-on-year declines in VAT and corporation tax.

Tax revenues were €108m or 1.1% ahead of target at end-April, an improvement on the position at end-March when taxes were €136m or 1.8% below target.

The Department of Finance said that tax receipts in the month of April were €244m above target. This was due in part to the earlier than expected payment of receipts from Deposit Interest Retention Tax (DIRT), which are accounted for under the income tax sub-head. This was a contributory factor in the strong performance of income tax in the month of April, which was €184m above target. Stripping out the impact of these earlier than expected DIRT receipts, income tax was €67m above target in April.

Three of the main tax categories - - income tax, corporation tax and excise duties - - outperformed their targets in the first four months of the year. VAT was €107m or just over 3% behind target at end-April due to a relatively poor performance in the non-VAT due month of February. PAYE receipts in the first four months of the year amounted to €2.8bn, a 4.9% increase on the same period in 2010.

Total spending at end-April, at €14.8bn, was €480m or 3.3% up year-on-year. Net voted current spending was up €916m or 7% whereas net voted capital expenditure was €436m or 31.8% down year-on-year. The year-on-year comparison for net spending is impacted upon by the reclassification of health levy receipts to form part of the new USC. This has the effect of increasing net voted expenditure. Adjusting for this, it is estimated that total net voted expenditure at end-April was effectively flat year-on-year.

Capital expenditure was €75m or 7.4% below target at end-April,

Debt servicing costs in the first four months of 2010 were just over €1.8bn. The Department said the large year-on-year increase in debt servicing expenditure reflects the cost of servicing a higher debt burden.

End April Exchequer Statement

End April Analysis Voted Expenditure

End April Analysis of Tax Receipts

Conall Mac Coille commented:

Pleasant surprise on tax revenues

Tax revenues ahead of schedule in year to April

  • Tax revenues in the year to April were €108m, or 1.1%, higher than expected in Budget 2011. This compared with a 1.8% shortfall in the year to March;

  • In the first three months of the year, income tax and value added tax (VAT) receipts were approximately 5% lower than expected;

  • These shortfalls highlighted fears that weak domestic demand would restrain tax revenues in 2011;

  • But income tax receipts are now 1.5% ahead of target in the year to April, and the shortfall in VAT receipts has diminished to 3.1%. Excise duties and corporation tax continue to outperform expectations;

  • Some of the improvement in the income tax performance was due to early payments on deposit interest retention tax. Nevertheless, income taxes still outperformed expectations accounting for the impact of these early payments.

Spending lower than expected

  • Total net voted spending was up 3.3% year-on-year but 1.8% below target in the four months to end-April. Some of the underspend related to strong PRSI receipts (which are netted off expenditure);

  • Overall, the exchequer deficit was €9.9bn in the four months to April, up from €7.0bn in the corresponding period of 2010. But this increase largely relates to the €3bn payment of promissory notes already included in the national debt;

  • Today's release suggests that tax revenues are more likely to meet the targets set out in Budget 2011.

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