|Source: Department of Finance/ Davy|
Irish Exchequer Returns show a deficit at end-April 2015 of €2.32bn compared to a deficit of €4.75bn in the same period last year. The improvement in the Exchequer deficit is driven by increased tax receipts and the transfer of €1.63bn from the NPRF (National Pensions Reserve Fund) to the Exchequer. Meanwhile tax revenues were €518m (4.2%) above target. However, tax revenues for the month of April were down €27m (1.1%) against the monthly target. Tax receipts are up 11.3% or €1.3bn on the same period in 2014.
The Department of Finance reported that income tax receipts of €5.75bn were collected to end-April 2015, a year-on-year increase of €343m or 6.3%. For the month of April, income tax was €83m or 5.2% below target, which is wholly attributable to weaker DIRT receipts on the back of low interest rates.
The first four months of the year saw VAT receipts of €4.03bn collected which represents an increase of €377m or 10.3%, when compared to the corresponding period last year. In addition, VAT receipts of €4.03bn at end-April, were slightly below the cumulative target (€43m).
Corporation tax receipts to end-April were €629m, which equates to a €331m increase when compared to the same period last year and €344m above target.
Non-tax revenues, at €395m were up €11m (3.0%) in year-on-year terms. The primary reason for this increase is a special dividend from the ESB in connection with the state asset disposal programme, which is somewhat offset by reduced ELG (bank guarantee) income due to the closure of the scheme to new liabilities.
Capital receipts at end-April of €3.68bn, were up €972m (35.8%) year-on-year, when the sinking fund 2014 contribution is excluded. The main reason for the increase is the transfer of €1.63bn, of proceeds from the sale in 2013 of preference shares in Bank of Ireland, to the Exchequer.
Interest expenditure at end-April 2015, at €3.03bn was €93m (3.0%) below target, primarily due to lower than expected costs on 2015 bond issuance.
Overall net voted expenditure for end-April 2015, at €13.72bn, was 1.6% or €218m below target and €65m (0.5%) higher in year-on-year terms. Net voted current expenditure at €13.05bn was down €192m (1.5%) against target and €66m or 0.5% lower in-year-on-year terms.
Conall Mac Coille, chief economist at Davy, commented: "Government deficit still likely to fall below 2% of GDP in 2015: Today’s exchequer statement shows tax revenues underperforming expectations by €27m in April. Tax revenues in April were hit by lower-than-expected revenue from Deposit Interest Retention Tax (DIRT) and VAT refunds hitting measured taxes (largely a timing issue). However, PRSI receipts were €24m ahead of target on the month. Voted expenditure is now €115m year-to-date below Budget forecasts. Finally, the debt interest bill is now €93m below the October Budget forecasts. So, on balance, we still believe the deficit in 2015 will beat the government’s updated forecasts for 2.3% of GDP, probably falling below 2%.
Tax revenues of €12.9bn were recorded to end-April 2015, up 11.3% on the year. Tax revenues were €518m, or 4.2%, ahead of October’s Budget forecast. However, on the month, tax revenues were below target by €27m. This shortfall largely reflected weak DIRT payments, hurt by low deposit rates. Weak VAT receipts were due to refund payments which are largely a timing issue. In any case, the strength of the labour market is becoming apparent in PRSI receipts – €24m ahead of target in April and €147m year-to-date. The recent April Statement assumed that tax revenues would finish the year €1bn ahead of October’s Budget forecasts. On balance, we still think revenues will finish more than €1bn ahead of last October’s projections.
Spending discipline is being maintained across government departments. Gross voted current expenditure was €81m below Budget plans, and capital expenditure was another €34m below. Together, this means that gross voted current and capital spending was €115m below target in the year to April. The exchequer is also benefitting from lower-than-expected debt interest payments, mainly due to the refinancing of expensive IMF loans. Debt interest in the year to April was €93m, or 3.0%, below October’s forecasts. Altogether, the items affecting Ireland’s general government balance are now €890m (or 0.5% of annual GDP) ahead of target in the first four months of the year. Should Eurostat rule that Irish Water falls outside the government sector, this will automatically shave another 0.3% of GDP off the deficit. So we still expect the final end-year deficit to fall below 2% of GDP."