Irish Economy
Irish tax revenue to end-February 2015 up €345m on budget target
By Michael Hennigan, Finfacts founder and editor
Mar 4, 2015 - 7:01 AM

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The Department of Finance in snowy Dublin, Thursday, Dec 02, 2010

Irish tax revenue of €6.8bn to end-February 2015 represents a year-on-year increase of €925m (15.9%) and is €345m (5.4%) above target according to Department of Finance data. Meanwhile the exchequer deficit fell to €205m at the end of February from €1.68bn in 2014 — however last year's data were distorted by once-off changes to a new European payment system.

Income tax receipts of €2.89bn were collected to end February 2015, a year-on-year increase of €183m or 6.8%. For the month of February, income tax was €91m or 7.1% above target.

The first two months of the year saw VAT receipts of €2.37bn collected which represents an increase of €330m or 16.2%, when compared to the corresponding period last year. In the month, VAT receipts were €40m (11.3%) above target.

Corporation tax receipts to end-February were €265m, which equates to a €174m increase when compared to the same period last year and €165m above target. Some of this, c. €50m, relates to one off nonrecurring payments.

Excise Duties totalled €778m to end-February, representing a year-on-year increase of approximately €130m (20.0%). Receipts in respect of Excise duties for the month of February amounted to €390m, which were €52m (15.3%) above target. €152m was collected in Stamp Duties receipts to end-February, up €45m or (42.0%) year-on-year while Local Property Tax receipts to end-February amounted to €115m, up €58m in year-on-year terms. This is due to a change in payment deadlines. Of the remaining smaller tax heads, CGT, CAT and customs combined were down €10m (7.3%) year-on-year and up €4m (3.3%) on target.

Overall net voted expenditure for end-February 2015, at €6.88bn, was down €172m (2.4%) year-on-year. Net voted current expenditure at €6.56bn was down €241m (3.5%) year-on-year. The most significant reduction was in the Department of Social Protection where a year-on-year reduction of €238m was recorded. Net voted capital expenditure at end-February 2015 was €324m. This represents a year-on-year increase of €69m (26.9%) driven by increased capital expenditure in the Departments of Defence, Jobs, Enterprise and Innovation and Education and Skills.

Total Exchequer debt servicing costs at end-February 2015 were €591m. Excluding the sinking fund contribution in 2014, this represents a year-on-year decrease of €128m or 17.8%. This is primarily due to lower bond interest resulting from the maturity of the 4% Treasury Bond 2014 in January 2014. Interest expenditure at end-February 2015, at €560m was marginally below target.

Conall Mac Coille, chief economist at Davy, commented: "Exchequer returns provide tentative evidence that the government may beat its 2.7% of GDP deficit target for 2015. Just two months into 2015, tax revenues are beating budget forecasts across a broad range of categories. Spending discipline is being maintained for now, after significant over-runs last year. Conservative budget assumptions may have helped some positive ‘surprises’ to emerge – particularly on non-tax revenues – but macroeconomic data on the Irish economy’s performance indicate that growth momentum is being maintained in 2015, for example buoyant retail and car sales, falling social welfare claimants and service sector PMI surveys still close to 60. Overall, tax revenues are already €450m ahead of target, close to 0.25% of GDP.

Budget 2015 pencilled in a 3.1% rise in tax revenues in 2015 from €41.0bn to €42.3bn. Exchequer returns for February show tax revenues up 13.2% on the same period in 2014, 5.5% (€443m) ahead of the Budget 2015 projections. Income taxes are up 6.8% on the year and were 2.1% (€58m) ahead of the February target. PRSI receipts are 8.2%, or €106m, ahead of target. Value-added tax (VAT) receipts have performed well, up 16.2% on the year and 0.3% (€8m) ahead of target. This is not surprising. Retail sales volumes were up 4.8% (excluding motor trades) in the year to January. Corporation taxes, excise duties and stamp duties have also shown strong growth, albeit with some one-off factors and timing issues at play. Nonetheless, the overall picture is that government revenues are beating targets.

Conservative assumptions on non-tax revenues have provided a buffer in recent years to ensure targets are met. So it is worth noting that non-tax revenues were €316m in the first two months of 2015, €15m ahead of target, driven by dividends from the state assets disposal programme. Similarly, debt interest costs are €14m, or 2.5%, below official forecasts.

These data suggest that for now expenditure discipline is being maintained, following budgetary over-runs across all three of the big spending departments (Education, Health and Social Protection) in 2014. Gross current spending was €8.4bn in the first two months of 2015, down 2.0% on the year. Gross capital expenditure was up by 24.2%, but this could be a timing issue given the lumpy nature of capital spending and it is far too early to say budgets are being exceeded."

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