Positive exchequer returns give scope for tax cuts

The prospect of tax cuts next year has improved according to official figures which show that the Government will comfortably exceed its deficit target for 2013.

Senior Ministers including Taoiseach Enda Kenny have indicated in recent weeks the tax burden on hard-pressed middle income earners will be eased in the next budget if the public finances permit. The exchequer returns for 2013 published yesterday show the Government deficit for the year will come in under the target of 7.5 per cent of gross domestic product (GDP).

The full picture will not become clear until the Central Statistics Office (CSO) has all the data for 2013 to calculate the General Government Balance but there is optimism that the deficit will actually come in under 7 per cent of GDP.

In a joint statement, Minister for Finance Michael Noonan and Minister for Public Expenditure and Reform Brendan Howlin noted the country had exceeded its deficit target for the third successive year.

"Looking to the future, it is important that we look beyond consolidation and continue to put in place the conditions that will allow the economy to grow sustainably and facilitate further job growth, the number one priority of Government," they said.

Sizeable deficit
However, they pointed out Ireland still had a sizeable deficit and the Government must "continue to be vigilant and disciplined" in its management of the public finances.

The exchequer returns show tax revenue and public spending were both a little under target for 2013. Total tax revenue of €37.8 billon was 0.4 per cent or €144 million below target while net voted expenditure was €321 million, or 0.7 per cent below target.

One of the reasons for the shortfall was that VAT receipts for December did not live up to expectations. Department of Finance officials believe this was for technical reasons and the figures for January will reflect increased consumer spending in the run-up to Christmas.

Income tax for the year was also a little behind expectations at €15.76 billion. A shortfall in Dirt receipts due to the very low interest rates was responsible for the underperformance. Year-on-year, income tax was up €582 million, or 3.8 per cent.

The revenue generated by the property tax was 27 per cent above target but this was entirely due to payments in advance for this year. Net voted expenditure for 2013 was €43 million, 0.7 per cent below target and down 4.2 per cent year-on-year. Both current and capital expenditure were down against targets. Mr Noonan said the returns show the tax base continued to grow in line with targets and provided a solid foundation going into 2014. It also emerged yesterday that Nama has generated €16.5 billion in cash since its inception in 2009.

Property development
The agency, which began taking over property development loans from the collapsing Irish banks almost four years ago, said it had reached its end of year target of redeeming €7.5 billion of the senior bonds issued to acquire bank loans in 2010 and 2011. Nama said it continues to generate significant cash through disposal activity and non-disposal income. Some €5.8 billion in cash was generated in 2013, including €3.8 billion from asset disposals. Meanwhile, the IDA announced yesterday that 13,367 jobs were created by client companies last year. It said this represented the highest level of job creation in over a decade.