Tax revenues in April came in a little below the Government’s target but remain well ahead of profile for the year to date.
The underperformance last month reflects considerably lower VAT collections than forecast, a reflection of consumer spending, and weaker DIRT collections, attributed to low interest rates.
Analysts said the Government remained on course to achieve a budget deficit below 2 per cent of economic output this year but there were warnings, too, that the recovery remains fragile.
Figures from the Department of Finance show that the Exchequer took in €2.39 billion in tax in April, €27 million or 1.l per cent less than the target. However, the €12.86 billion in tax receipts accumulated since the start of the year is €518 million or 4.2 per cent ahead of profile set down by the Government.
The spring economic statement last week assumed tax revenues this year will ultimately come in about €1 billion ahead of target.
“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 – €24 million ahead of target in April and €147 million year-to-date,” said Davy economist Conall Mac Coille.
“On balance, we still believe the deficit in 2015 will beat the Government’s updated forecasts for 2.3 per cent of GDP, probably falling below 2 per cent.”
Business group Chambers Ireland said the revenue underperformace in April underscored the need for prudence in the October budget.
“Any measures introduced to put more money back into people’s pockets in the budget must be spread evenly across the public and private sector to ensure that all workers can feel the benefit,” said Mark O’Mahoney, director of policy of the Chambers group.
“Government has signalled that there will some increases in public sector pay and these increases must be intrinsically linked to ongoing productivity gains.”
The figures showed public expenditure in the first four months of the year was a little behind target.
The cost of servicing the national debt since January is also a little lower than expected: some €3.04 billion in interest expenditure was €93 million or 3 per cent below target, primarily due to lower than expected costs on the issuance of bonds this year.
Collections of income income tax, which includes the universal social charge and DIRT, came in €83 million last month or 5.2 per cent behind target at €1.51 billion. This was “wholly attributable” to weaker DIRT receipts, said the Department.
Income tax returns in the first four months of the year stood at €5.75 billion, €53 million or 0.9 per cent ahead of target but €343 million or 6.3 per cent greater than in the same period in 2014.
Collections of VAT came in €67 million or 22.2 per cent below profile at €233 million in April. VAT returns since the start of the year stand at €4.03 billion, €43 million or 1.1 per cent lower than the target but €377 million or 10.3 per cent higher than in 2014.
Higher than anticipated corporate tax and excise returns compensated in part for the VAT and DIRT underperformance in April. The State received €73 million in corporate tax last month, almost seven times greater than anticipated, and it recieved €443 million in excise duties, €14 million or 3.4 per cent more than expected.
The overall Exchequer deficit at the end of April was €2.32 billion, compared with €4.75 billion at the same time in 2014. According to the Department, the improvement was driven by increased tax receipts and a €1.63 billion transfer into the Exchequer from the National Pension Reserve Fund.
Non-tax revenues in the first four months stood at €395 million, up €11 million year-on-year, largely as a result os a special dividend from the ESB in connection with the state asset disposal programme. The dividend, however, was “somewhat off-set” by reduced bank guarantee income arising from the closure of the scheme to new liabilities.
The State recorded €3.69 billion in capital receipts in the first four months, up €972 million year-on-year when excluding sinking fund contributions made last year. The Department said “the main reason for the increase” was the transfer to the Exchequer of €1.63 million in proceeds from the 2013 sale of preference shares in Bank of Ireland.
On the spending side, net voted expenditure between January and April was €13.72 billion. This was 1.6 per cent or €218 million below profile and €65 million higher than in the same period in 2014..
At €13.05 billion, current expenditure was down €192 million or 1.5 per cent against profile. Capital expenditure reached €672 million, €26 million or 3.7 per cent below target.
Some €1.21 billion in non-voted capital expenditure since January was down €562 million on 2014. “This is a combination of a reduction in short-term loans to the Social Insurance Fund, which have been paid in full and the fact that, in 2014, Ireland made its final required capital contribution of circa €255 million to the European Stability Mechanism,”said the Department.
