Irish Exchequer Returns: Tax revenues were €263m
or 1.4% above target at end-July, according to the latest statement on public
finances issued today. Revenues at end-July, at €18.6bn were €1.5bn or 8.6%
higher than in the same period last year. Meanwhile, debt servicing or interest
paid on the national debt rose €750m.
The Exchequer Returns are not a full statement of
the public finances. Social insurance (PRSI) receipts/payments are not included
and bizarrely, local government is also ignored.
The Exchequer deficit at end-July 2011 was
€18.9bn compared to a deficit of €10.2bn in the first seven months of 2010. The
increase in the deficit was due to non-voted capital expenditure banking related
payments, including €3.1bn in Promissory Note payments to Anglo Irish Bank, INBS
and EBS, and just over €7.5bn in once-off payments relating to the
recapitalisation of the banking sector announced following the PCAR stress tests
at end-March. Excluding these payments, the Exchequer deficit fell by almost
In July, the year-on-year increase in tax
revenues was due primarily to higher income tax receipts, arising from the
Budget 2011 measures, including the introduction of the USC (universal social
charge). Excise duties, corporation tax, customs duties and stamp duties.
Three of the “big four” taxes - - income tax,
corporation tax and excise duties - - recorded surpluses in the first seven
months of the year. Income tax was €160m or 2.2% above target at end-July.
Excluding the beneficial impact of earlier than expected DIRT payments, both in
April and July, income tax was a little below target in the first seven months.
That said, the underlying performance of income tax in recent months has been
encouraging, with the targets for both June and July marginally bettered.
Corporation tax was €93m or 6% above target at end-July. The Department of
Finance said the very large surplus in the month of July arose partly because of
a delay in payments from May. While this was expected, the extent of the delayed
payments was in excess of what had been anticipated.
Excise duties recorded a €67m (2.6%) surplus in the first seven months of the
year. However, VAT – the other of the “big four” taxes – recorded a shortfall
against target in the period to end-July of €190m (2.9%). A significant element
of this shortfall has been evident since end-February. The large stamp duty
surplus at end-July can be explained by earlier than expected payments of just
over €100m in July in respect of the pension fund levy, which was introduced to
finance the Jobs Initiative. Each of the other smaller taxes has performed above
or in line with expectations so far in 2011.
Total net voted expenditure at end-July, at
€25.7bn, was €224m or 0.9% up year-on-year. Net voted current spending was up
€813m or 3.5% but net voted capital expenditure was €589m or 26.4% down.
Adjusting for the reclassification of health levy receipts to form part of the
USC which has the effect of increasing net voted expenditure, it is estimated
that total net voted expenditure fell 2.6% year-on-year.
Compared to target, total net voted expenditure
was down €536m or 2% at end-July. Net voted current expenditure was €341m or
1.4% below profile. The main underspend was on the Social Protection Vote
(-€125m) and was due to higher than expected PRSI receipts which more than
offset excess expenditure across a number of schemes. The other main underspends
were on the Education & Skills (-€116m) and Agriculture, Fisheries & Food
(-€95m) allocations in the Budget. These were largely due to timing issues with respect to certain
payments and receipts, and offset pressures arising in other areas of
Net capital expenditure was €195m or 10.6% below
target at end-July, largely due to shortfalls in the expenditure of the HSE,
Environment and Agriculture Votes of €45m, €43m and €30m respectively. These
shortfalls against target were largely caused by timing factors and net voted
capital spending is expected to be in line with target for the year as a whole.
The Department of Finance said total debt
servicing expenditure at end-July, including funds used from the Capital
Services Redemption Account was just over €3bn. Excluding the sinking fund
payment which had been made by end-July in 2010 but which has not yet been made
in 2011, debt servicing costs to end-July 2010 were some €2.25bn. The
year-on-year increase in comparative total debt servicing expenditure therefore
End July Exchequer Statement
Analysis End July Net Voted Expenditure
Analysis end July Tax Receipts
Conall Mac Coille, chief
economist at Davy, commented:
Significant improvement in tax revenues in July: Exchequer returns now ahead of
Tax revenue 1.4% ahead of
target, up 8.6% on the year
In H1 2011 there was a small
0.7% shortfall in tax revenue relative to the Budget 2011 targets;
This shortfall has been
eliminated, as corporation tax receipts expected earlier in 2011 were paid
Corporation tax receipts were
7.6% behind in H1, but are now up 6.0% on the Budget 2011 targets.
Most tax headings now ahead of
Excise and Customs are €73 ahead
of target respectively, and income tax €160m ahead;
The Budget 2011 measures on
income taxes are now being seen in the tax returns;
Income taxes are 2.2% ahead of
schedule, but a little below target accounting for early payments of DIRT.
Spending remains below the
Budget 2011 target profile
Underlying exchequer deficit
down €2bn over 2010
The exchequer deficit was
€18.9bn in the first seven months, up from €10.8bn in H1 2011, reflecting
once off €7.5bn payments relating to the PCAR/PLAR bank tests.
We expect these payments will
not ultimately add to the general government debt as they are being met by
the state's cash balances and NPRF. • Overall, today's exchequer returns are
an encouraging sign that the budgetary plans for 2011 are on track.