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News : Irish Economy Last Updated: Oct 5, 2011 - 6:07 AM


Irish Exchequer deficit at end-September 2011 ex-bank funding issues, down over €3bn compared with 2010
By Finfacts Team
Oct 4, 2011 - 5:09 PM

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The Department of Finance said today that the Irish Exchequer deficit at end-September 2011 was €20.7bn compared to a deficit of €13.4bn in the first nine months of 2010. The €7.3bn increase in the deficit is mainly due to non-voted capital expenditure banking related payments of €3.1bn in promissory note payments to Anglo Irish Bank, INBS and EBS, and just over €7.5bn in once-off payments relating to July’s recapitalisation of the banking sector. Excluding banking related payments, the Exchequer deficit fell by over €3bn compared to the same period in 2010.

Tax revenues at end-September 2011, at €24.1bn were €1.9bn (8.7%) higher than in the same period last year. This year-on-year increase is due mainly due to income tax being up over 25% on the corresponding period in 2010 relating to measures introduced in Budget 2011, most notably the USC (universal social charge),  and stamp duties being up almost 60% year-on-year due to receipts from the levy on pension funds, introduced to fund the Jobs Initiative.

Tax revenues were €160m (0.7%) above the Budget 2011 target at end-September but this is largely due to beneficial timing factors relating to income tax and also the receipts from the pension levy. Income tax is €147m (1.6%) above target. Excluding the beneficial impact of earlier than expected DIRT payments in April and July, which were originally targeted for collection in October, income tax is just 0.9% below target after nine months of the year.

The Department said that given the very large target set in the Budget and the introduction of such significant revenue raising measures, this is an encouraging performance. Excise duties, the third biggest source of tax revenue, are €77m (2.3%) below target so far in 2011.

VAT had a shortfall against target in the period to end-September of €300m (3.6%) following a deficit of €71m in September. The Department said this is disappointing, particularly as it is the fourth consecutive month that VAT has recorded a shortfall. The stamp duty surplus at end-September can be explained by payments of some €457m from the levy on pension funds.

Total net expenditure at end-September, at €33.4bn, is €184m (0.6%) up year-on-year. Net current spending is up €976m (3.2%) but net capital expenditure is €793m (26.7%) down. Adjusting for the reclassification of health levy receipts to form part of the USC, it is estimated that total net expenditure fell 3% in the year to end-September (net voted current expenditure fell 0.8% on that basis).

Total debt servicing expenditure at end-September, including funds used from the Capital Services Redemption Account is some €3.1bn. Excluding the sinking fund payment which had been made by end-September in 2010 but which has not yet been made in 2011, debt servicing costs to end-September 2010 were just over €2.3bn. The year-on-year increase in total debt servicing expenditure is therefore just under €0.8bn. 

End September Exchequer Statement (pdf)

Analysis End September Tax Receipts (pdf)

Analysis End September Voted Expenditure (pdf)

Conall Mac Coille, chief economist at Davy commented:

Tax revenues remain ahead of target

  • In the year to August tax revenues were 0.7% ahead of target, down slightly from 1.0% in the year to July;
  • The €77m shortfall in excise duties was a timing issue following the delay of a €112m payment;
  • Income taxes remain ahead of target and value added taxes behind, by 1.6% and -3.6% respectively;
  • Stamp duties have been flattered by the new pension levy, to the tune of around €460m;
  • Corporation taxes are 1.5% behind, but it is too early to say if this shortfall reflects timing issues or genuinely weak receipts.

Spending remains behind expectations for year to August

  • Net voted expenditure was 2.2% below profile for the first nine months, and 3.0% down on the year adjusting for the reclassification of the health levy.

Today's out turn is positive news for the Exchequer

  • September, October and November are key months for tax revenues, accounting for 35% of the total;
  • That tax revenues remained ahead of target in September is clearly positive given the uncertainties surrounding the Irish and global economies.

The performance of the exchequer returns should be assessed in light of the very large deficit expected in 2011

  • That tax revenues are meeting budgetary targets is encouraging, but those targets are for a government deficit equal to 10% of nominal GDP in 2011. • There is no room for complacency heading into Budget 2012

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