Higher tax take leads to better exchequer deficit

Tuesday 05 August 2014 21.55
Most taxes were ahead of target and spending was largely on profile
Most taxes were ahead of target and spending was largely on profile

The Exchequer deficit stood at €5.18 billion at the end of July, an improvement of nearly €800 million on the figure predicted in the budget.

According to the latest Exchequer returns from the Department of Finance, the improved performance was accounted for by increased tax receipts and reduced spending on interest payments.

Total tax revenue collected to the end of July amounted to €22.37 billion, an increase of €1.45 billion, or 6.4%, on the same period last year.

The total tax take was nearly €550 million, or 2.5%, ahead of target.

Tax revenues for the month of July alone were €327 million above the monthly target, although that outcome was inflated by better corporation tax receipts, which should have been accounted for in June, but were delayed by the new SEPA payments procedure.

Corporation tax receipts for the seven months to July were down 1%, or €21 million, compared to the same period last year, but are €69 million, or 3.4%, above profile. 

Income tax, VAT and excise duties are all ahead of target.

Stamp duties and local property tax receipts were in line with profile coming in at €438 million and €338 million respectively.

Overall spending in the first seven months came in at €24.17 billion, 0.7% lower than the same period last year and 0.3% below profile.

Departmental current spending at €23.07 billion was 0.1%, or €24 million, above target driven by overspends in the Department of Health which was 4% above its target spend.

However, the spend was offset by an underspend in the Department of Social Protection, where spending was €121 million, or 1.7%, below target.

The cost of servicing the national debt came in at €5.12 billion for the seven months, a decrease of €45 million, or nearly 1%.

Interest spending was 6% below budget projections which was accounted for by a bond-buy back last December, resulting in lower interest expenditure in the early part of the year.

"The Exchequer returns for the first seven months of 2014 show a strong performance in terms of both tax and expenditure," the Minister for Finance, Michael Noonan said.

"If this pattern continues in the second half of the year the Budget adjustment will be somewhat less than the €2 billion originally planned," the Minister added.

"In all, the combined Exchequer outperformance for the first seven months of the year equates to around half a percent of GDP," Philip O'Sullivan, chief economist with Investec said. 

"With the Budget now a little over two months away, these figures will provide ammunition to those calling for an easing of the fiscal consolidation path."

"Taxpayers are likely to see some respite in their annual tax bills in the budget, possibly through an increase in tax credits or a widening of the tax bands," according to Peter Vale, Tax partner at grant Thornton. 

"While any such adjustment will still leave tax payers considerably worse off versus their position in 2007, a decrease in their monthly tax bill in the region of €50 per month could be expected," he concluded.