The Government is set to take the benefit of a surge in corporation tax returns as preparations for the October budget intensify.
With exchequer receipts at the end of July almost €900 million ahead of target, the biggest contribution by far came from €653 million above profile in corporation tax payments.
The figures came as the Central Statistics Office (CSO) reported a month-on-month increase of 300 to 208,900 in the seasonally adjusted number of unemployed people. The unemployment rate, unchanged in July at 9.7 per cent, was down from 11.2 per cent a year earlier. The number without work fell 32,400 year on year.
Fianna Fáil said the unemployment data pointed to “possible stagnation” in the unemployment rate in the first half of the year. “Government Ministers will have their sails punctured by the first recorded monthly rise in the unemployment figures in 18 months,” said jobs spokesman Dara Calleary.
The latest exchequer data follows a signal from Minister for Finance Michael Noonan that he now expects a tax returns to come in €1.4 billion ahead of profile by year-end.
Receipts were already €800 million above profile at end-June and were €893 million ahead by the end of July, a €93 million gain in one month.
“The improvement in the Government’s exchequer position can largely be explained by the combination of the fruits of the economic recovery and the fall in interest costs due to the refinancing of expensive IMF loans,” said Dermot O’Leary, chief economist at Goodbody. “The performance of both VAT and income tax are testament to the speed of the economic expansion now in train.”
However, Mr O’Leary questioned why social protection spending had not fallen since this time last year given the decline in unemployment.
VAT receipts, which reflect consumer spending, reached €7.67 billion in the period to the end of July, up €560 million year-on-year and above profile by €79 million.
The Government received €9.76 billion in income tax to the end of July, €21 million above profile and up €517 million on a year-on-year basis.
Although these returns were €33 million under profile in July, Mr Noonan’s department said that was “wholly attributable” to weak deposit interest retention tax receipts on the back of low interest rates.
Budget deficit
The figures point to a budget deficit of €648 million between January and July, compared with a €5.18 billion deficit a year previously. On a like-for-like basis, excluding once-off transactions, the deficit was €2.6 billion.
Tax revenue reached €24.54 billion in the first seven months of 2015, €2.16 billion higher than in 2014.
The data reflects tight overall control over spending, with €30.47 gross voted expenditure €179 million below profile.
In addition to an overspend in the Department of Social Protection, however, health expenditure now exceeds target by €152 million.
According to the CSO, the youth unemployment rate rose in July to 20.2 per cent from 19.9 per cent in June. The youth unemployment rate refers to people aged 15-24 years. The CSO said unemployment rate was 10.8 per cent for all males in July, unchanged from June.
