Government deficit projected to be ahead of target

Monday 14 October 2013 12.27
Deficit ahead of target despite fall in VAT and DIRT revenue
Deficit ahead of target despite fall in VAT and DIRT revenue

The Department of Finance says the Government deficit for this year will be 7.3% of GDP, slightly ahead of the Troika target of 7.5%.

The better outcome is expected despite a slight slippage in tax revenue of €125m, due to a small under-performance in VAT and DIRT tax.

The information is disclosed in the White Paper Estimates of Receipts and Expenditure.

The White Paper is prepared ahead of the Budget, and shows the expected revenue and spending amounts for next year before any Budget Day changes.

The improved deficit position means that without any changes on Budget Day, the General Government Deficit would fall to 5.8% of GDP next year.

The White Paper foresees an increase in tax revenues of some €2.3bn next year, mostly from income tax and VAT.

The extra VAT revenue includes €350m more from the automatic ending of the special 9% VAT rate for hotels, restaurants and some other labour-intensive businesses.

This measure - introduced as part of the jobs initiative of 2011 - is due to automatically revert to the normal rate of 13.5% on 31 December.

The yield from the local property tax is now estimated at €300 million - €50m more than in Budget 2013.

For next year the take from the Local Property Tax is estimated at €550m - the effect of the tax being levied for a full year.

Non-tax revenues will fall by around €690m next year, mainly driven by a fall in income from the wind-down of the Bank guarantees.

Charges on banks for these are projected to net the Government €185m in 2014, compared to €1bn in 2012.

These figures are the opening position for the Government's finances next year.

Most will change as a result of measures to be introduced in Tuesday's Budget and spending statement.