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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.
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
