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News : Irish Economy Last Updated: Sep 4, 2013 - 9:08 AM


Irish Economy 2013: Budget deficit at €7.3bn year to-date in August
By Finfacts Team
Sep 4, 2013 - 2:05 AM

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Michael Noonan, Irish finance minister, speaking to the media before the Eurogroup meeting of Eurozone finance ministers, Brussels, Feb 11, 2013.

Irish Economy 2013: The exchequer returns for August show a deficit of €2.1bn, bringing the total to €7.3bn in the year to-date.

Tax revenues to end August 2013 remain in line with expectations, down €57m (0.2%) on target and up €834m (3.8%) year-on-year, while net voted expenditure is €644m (2.2%) under target and down €1,610m (5.4%) on the same period last year.

The cost of servicing the national debt, at €5.44bn to end-August, was €653m (13.6%) higher than the corresponding period last year.

Peter Vale, tax partner at Grant Thornton commented: "“The overall picture from today’s Exchequer figures shows both overall tax receipts and expenditure levels broadly on target, however there is cause for concern under some individual tax headings.

VAT returns continue to disappoint and are now €245m behind target. Excise receipts are similarly disappointing and €127m behind target. While earnings levels have stabilised, there is a continuing nervousness amongst consumers which is reflected in a tendency to save rather than spend.

There has been some more positive retail data released in recent weeks and whether this is reflected in better VAT receipts next month will dictate the minister’s room for manoeuvre as he sits down in the coming weeks to frame the Budget 2014.

A note of caution is that taxpayers will suffer a full year’s property tax next year, drawing additional money out of the economy and dampening spending further. This is the fine line that the Minister must tread on October 15th. Can he ensure that additional tax increases do not push the economy over a tipping point that reduces economic growth and the unwanted outcome of lower tax receipts?"

David McNamara, economist at Davy, commented  -- "Davy View: Today's figures show that August tax returns were marginally behind target by €57m (-0.2%). However, the slippage in tax receipts is again being offset by deeper cuts on the expenditure side with net expenditure €644m (-2.2%) below target. The slippage in tax receipts is a concern, but this year's deficit target should easily be met courtesy of deeper expenditure cuts and better-than-expected non-tax revenues.

Tax returns slip below target in August

Today's figures point to a continuation in the trend seen throughout 2013. Tax returns were close to profile (0.2%, or €57m, below forecast), helped by buoyant corporation tax returns, and expenditure remains 2.2% below target.

On the tax side, the government reported a continued deficit in income tax versus the target of 0.6%. VAT was also behind target, by 3.5%, and excise duties were 4.1% behind. The last of the 'big four' tax headings, corporation tax, was €242m, or 12%, ahead of target. In previous months, receipts in this area had been sufficient to cover shortfalls in the other main tax bands, but the overall tax take slipped just behind profile by €57m (-0.2%) in the year to August.

The slippage in the main tax heading is a slight concern, but the deeper-than-expected cuts on the expenditure side have more than offset this shortfall. Year to date, gross voted current expenditure was 0.9% below target. The bulk of expenditure in this area is accounted for by Health and Social Protection and, encouragingly, both were in line with forecasts. On the capital side, gross voted expenditure was a massive €236m (14%) below. So the government continues to prioritise deeper cuts on the capital budget while maintaining current expenditure closer to target.

The deficit in the year to August was €7.3bn, compared to an expected deficit of €12.2bn. This is largely accounted for by the restructured promissory note payments (€3.6bn), the CoCos sale (€1bn) and larger-than-expected Central Bank income (€1.1bn) as well as the savings on the expenditure side. Interest costs account for €4.7bn of the overall deficit, meaning the primary deficit was €2.6bn.

The government is still set to comfortably meet this year's deficit target of 7.4% of GDP despite the disappointing tax returns, courtesy of one-off and larger-than-expected non-tax revenues."

Irish Budget 2014 Page

Analysis End August tax Receipts

Analysis End August Gross Voted Expenditure

End August Exchequer Statement

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