Exchequer numbers strengthen Government’s hand

The Government has received a major boost ahead of the forthcoming budget with the latest exchequer returns showing tax revenue running €1.4 billion ahead of target.

The figures for the first eight months of the year were buoyed by an unexpected bounce in corporation tax receipts, which came in at €3.3 billion, 38 per cent or €912 million above profile.

This helped reduce the exchequer deficit to €1.3 billion, down from €6.3 billion at the end of August last year. The deficit is now forecast to come in well below 2 per cent of gross domestic product by the year’s end.

The figures show tax receipts for the first eight months were €27.3 billion, €2.4 billion or 10 per cent higher than last year, with all four main tax heads – income tax, VAT, excise duty and corporation tax –  running ahead of target.

Income tax

Income tax, the biggest revenue draw for the Government, came in at €11.2 billion for the period, representing a year- on-year increase of €639 million or 6 per cent.

The Department of Finance said the performance was consistent with the recovering labour market, solid employment growth and increases in average weekly earnings .

VAT generated €7.96 billion, €107 million above profile and €583 million up on last year, one of the clearest indications yet of retail sector recovery. Excise duty was €3.3 billion, €24 million up on projections and €223 million ahead of last year’s total at this stage.

Overruns

On the expenditure side, overruns in health (€283 million) and social protection (€106 million) were offset by savings in other areas. This meant total net voted expenditure came in at €27.3 billion, €297 million below profile.

There were also capital expenditure savings of €78 million and savings on debt interest of €396 million or 8.1 per cent, related to the refinancing of International Monetary Fund loans earlier this year.

The figures suggest the Government will end the year with €2 billion more in tax than it originally forecast and double what it predicted in the spring.