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News : Irish Economy Last Updated: Jun 5, 2014 - 10:59 AM

Irish Economy 2014: Tax revenues up 2.9% - €446m - in year to May
By Finfacts Team
Jun 5, 2014 - 1:33 AM

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Irish Economy 2014: Exchequer returns for the year to May show the Government’s tax receipts are 2.9% or €446m ahead of the budget target.

Receipts were higher than expected in all the main tax heads, except for capital gains tax while spending was €156m below target, or 0.9%. Nevertheless, Department of Health is €144m or 2.8% above its limit.

The Exchequer deficit [pdf] at the end of May was €3.5bn, compared with €5.3bn at the end of May 2013 - - the Department of Finance said "the main drivers behind this year on-year improvement in the Exchequer deficit are increased tax revenue, lower voted expenditure and a significant reduction in bank guarantee payments associated with the liquidation of IBRC."

  • Total tax revenue of €15.59bn was collected to end-May, an increase of €831m (5.6%) on the same period last year. In addition, cumulative tax revenues are €446m (2.9%) ahead of target. May tax revenues of €4.04bn were €224m (5.9%) ahead of the monthly target.
  • Income tax totalled €6.60bn to end-May, an increase of €476m (7.8%) year-on-year and up €114m (1.8%) on target which is reflective of an improving labour market. For the month of May, income tax receipts were €8m (0.7%) ahead of the monthly target.
  • VAT receipts for the year to date totalled €5.21bn, up €39m (0.7%) on target and up €220m (4.4%) in year-on-year terms.
  • Corporation tax receipts of €981m to end-May are €61m (5.8%) down year-on-year but €114m (13.1%) above target. The Department said the year-on-year performance is primarily driven by a non-recurring, unexpected payment in 2013, which had been accounted for in the targets. For the month of May, corporation tax receipts of €684m were €5m (12.3%) ahead of target.
  • Excise duties, at €1.93bn for the first five months of the year, are €100m (5.5%) up year-on-year and up €91m (4.9%) against target. In May, excise receipts were €9m (2.2%) ahead of the monthly target.
  • Stamp Duties at €90m, were down €121m (29.4%) year-on-year but up €34m (13.2%) on target. Excluding once off payments, stamp duties are up €49m (20.4%) compared to the same period last year.
  • Local Property Tax (LPT) receipts of €290m were collected to end-May, up €15m (5.4%) on target.
  • Taken together, the remaining smaller tax-heads - - Customs, CGT and CAT - - are up €39m (18.8%) year-on-year but marginally down (€2m or 0.7%) on target.

Exchequer debt serving costs at end-May 2014 were €4.07bn, a year-on-year decrease of €177m or 4.2%, primarily reflecting timing factors.

Peter Vale, tax partner at Grant Thornton comments on May’s Exchequer Return figures: "This is yet another set of solid figures, both in respect of tax receipts and spending control. Notwithstanding the cumulative effect of six years of tax increases, there is a renewed sense of consumer confidence, reflected in higher spending and resultant robust VAT returns, 4.4% ahead of this point last year.

Income tax figures continue to impress, 7.8% ahead of last year, evidencing the positive employment data that we have seen in recent months.

There are mixed messages in terms of possible relief for taxpayers later this year but on balance it appears that there will be some respite in terms of adjustments to tax bands and perhaps tax credits. However this will be offset by the looming water charges, most likely leaving the taxpayer in a worse off position next year.

David McNamara, economist at Davy, comments: "Today’s Exchequer returns point to a solid first half of the year and leave the government on track to hit its deficit target. Tax revenues are ahead of schedule by 2.9%, or €446m. That compares to a performance of 2% above target in the year to April. Tax receipts have grown by 5.6% in the first five months of 2014 compared with 2013. Spending discipline is being maintained in most departments, so that overall current expenditure is 0.6%, or €140m, below the Budget 2014 plans. That compares to a 0.2% underspend in the year to April and leaves the deficit at €3.5bn to end-May, compared to €5.3bn to end-May 2013.

However, spending pressures have persisted in Health. Gross current expenditure in Health is 2.4%, or €132m, ahead of target in the year to May. However, this continues to be offset by spending discipline in other departments, leaving total gross current spending 0.4%, or €82m, below target. In particular, savings in Social Protection (-€26m) and Education (-€72m) have helped the arithmetic. Spending overruns are also being offset by underspending on the capital budget of €57m (-6.9%). However, this gap is narrowed somewhat by overspending in the Transport budget of €48m (+31.2%).

On the tax side, all the main headings are ahead of target in the year to May. Most notably, income tax is €114m (+1.8%) ahead of target, while VAT is €39m (+0.7%) and corporation tax €114m (+13.1%) ahead. Excise duties are €91m (+4.9%) ahead of target while stamp duties are €34m (13.2%) ahead.

So, the picture remains largely unchanged. Tax receipts are being boosted by the uplift in the jobs market, while commensurate savings in Social Protection and capital expenditure are offsetting overruns in Health."

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