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News : Irish Economy Last Updated: Apr 4, 2013 - 8:58 AM


Irish Economy: Exchequer deficit at end Quarter 1 2013 fell to €3.69bn
By Finfacts Team
Apr 3, 2013 - 5:03 PM

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Michael Noonan, Irish finance minister and current chairman of the Ecofin council of EU finance ministers, at a press briefing in Brussels, Tuesday, Jan 22, 2013.

Irish Economy: The Exchequer deficit at end Quarter 1 2013 stood at €3.69bn, €568m lower than Quarter 1 2012. Both total tax revenue of €8.82bn and the net voted expenditure outturn are in line with targets.

Tax revenues to end-March are up €95m (1.1%) year-on-year. For the month of March, tax revenues amounted to €3.00bn, an increase of €172m (6.1%) on the same month in 2012. Income tax for the month was €56m (5.6%) up on March 2012 and €7m (0.7%)  ahead of target. On an underlying basis, income tax increased €267m (7.9%) year-on year possibly reflective of a stabilising labour market.

Corporation tax fell €74m (15.8%) year-on-year to end March, while recording an increase of €167m (236.6%) for the month over March 2012. The Department of Finance said that on an underlying basis, corporation tax recorded year-on-year growth of €26m (16.5%) and was 2.8% above
target to end March. Excise duties, at €990m at end-March, are behind target though are up marginally (0.8%) on the year. When compared to March 2012, excise duties for the month decreased €2m (0.6%).  VAT, the last of the “big 4” tax-heads, recorded cumulative growth of €8m (0.2%) year on-year but a decrease of €41m (3.0%) on a monthly basis.

Stamp duties recorded receipts of €33m, an increase of €6m (22.9%) on March last year. On cumulative basis, stamp duties have increased €190m (163.5%) year-on year. This increase is primarily a result of a timing issue related to the Health Insurance Levy and is expected to level out over the course of the year. Capital Gains Tax was down €1m (12.9%) for the month and down €86m (55.2%) cumulatively. This is primarily due to the once off nature of some large payments received in February 2012. March 2013 saw the first receipts of Local Property Tax with €1.3m received into the Exchequer. The Department said this is particularly encouraging given the fact that payments were not due until much later in the year.

Taken together, the remaining “minor” tax heads – CAT, Customs – are broadly in line with  last year’s performance, with a combined year-on-year fall of approximately €6m.

Issues for net voted expenditure for March 2013 were €10.93bn. This represents a year-on-year decrease of €689m (5.9%). On an underlying basis, adjusting for the PRSI / Income tax re-classification in 2012, the year-on-year expenditure decrease is 4.2%.

Net voted current expenditure fell  €545m (4.9%) to €10.55bn to end March 2013, or 3.1% on an underlying basis. Net voted capital expenditure at the end of March 2013 amounted to €387m, which compares to €531m for the same period last year, a decrease of 27.1%.

Commenting on the end-March Returns, Michael Noonan, the minister for finance, and Brendan Howlin, the minister for public expenditure and reform, said: “The Exchequer statement for the first quarter of 2013 highlights that the Government’s plan to restore order to our public finances is working. Tax revenues continue to grow in line with targets and expenditure on public services is within Budget.

Stable public finances are a necessary pre-condition for economic growth, job creation and the return of international confidence in this country. There have been positive developments on all three of these fronts, which can be seen in employment growth in recent quarters, the significant investment in Ireland by domestic and international companies and the successful return to benchmark bond markets last month.

Exchequer Final Statement - March 2013

Appendix I - End March 2013 Tax Receipts

Appendix II - End March 2013 Expenditure

Peter Vale, tax partner at Grant Thornton, comments: “Overall, this is another good set of figures, with tax receipts in the year to date both ahead of target and ahead of the same period last year.

The income tax figures are robust, with March figures 5.6% ahead of March last year and also ahead for the year to date. It appears that some of the positive employment data that we’ve seen in the last couple of months is now coming through to the Exchequer.

On a note of caution, the VAT figures for March were disappointing, behind both last year and targeted figures. This is perhaps reflective of a difficult “January Sales” period for retailers. VAT is a good indicator of the strength of the domestic economy so the next set of key VAT figures in early June will be critical.

The Capital Gains Tax position remains unchanged, with tax receipts less than half of last year’s levels, despite the higher rate. CGT receipts predominantly come in later in the year and it will be interesting to see if this trend continues.

On the positive side, spending appears to have been reined in and the big spenders, Social Protection and Health, are both showing significant decreases compared with last year.

Finally, it was interesting to see some very eager property tax payers stump up €1.3m in tax, four months early!”

Exchequer Returns in Q1 perform in-line with Budget 2013 expectations: Conall Mac Coille, chief economist of Davy, comments: "Today's exchequer returns were closely in line with Budget expectations. Tax revenues, including PRSI receipts, were 0.2% behind target. Corporation taxes performed particularly well, 60% ahead of profile in Q1, due to an unanticipated €140m payment in March. But Value Added Tax (VAT) was 2.1% weaker than expected. Gross current expenditure was 1.1% ahead of target, but the Department of Finance indicated that this was due to a timing issue, with payments expected in April actually paid in March. For now, the Departments of Health and Social Protection remain within their budgets.

Today's exchequer returns for March complete the first quarter of 2013. Broadly speaking, both tax revenues and expenditure have performed close to the Budget 2013 plans. Tax revenues in Q1 (including PRSI receipts and appropriations in aid) were 0.2% behind the Budget 2013 target. An unexpected €140m payment in March meant that corporation taxes were 60% ahead of target in Q1. The Department of Finance indicated that this was an entirely unexpected payment and not a timing issue. So corporation tax receipts have had a robust start to the year.

However, the other main tax components were all behind target – VAT by €72m (-2.1%), excise duties by €35m (-3.4%), income taxes by €11m (-0.3%). PRSI and fund receipts were €71m lower than expected. The most worrying development here is the weakness in VAT receipts, perhaps indicating that consumer spending fell back in Q1 after a strong performance in H2 2012. Indeed, the three month growth of retail sales fell back to -1.7% in February and to -0.5% excluding volatile motor trades.

Current expenditure was 1.1%, or €137m, ahead of the Budget 2013 target. However, the Department of Finance indicated that this overspend primarily reflected a timing issue – specifically, early payments by the Department of Education that had been expected to be made in April. Excluding these payments, gross current expenditure in Q1 was close to target, with even the Department of Health inside its budget.

Gross capital expenditure was just €397m in Q1 2013, or 9.1% below Budget 2013 plans. So capital expenditure is already being cut back more aggressively than planned, perhaps in anticipation of overspending elsewhere. Indeed, today's publication of the IMF's 9th review of Ireland's programme highlighted the risk that health spending may overrun again in 2013 and indicated that the health budget is now monitored on a monthly basis by a high-level cabinet committee. But for now the exchequer returns indicate that the public finances are in-line with the Budget 2013 plans."

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