Tax revenues have remained buoyant in August, providing further evidence of the favourable Exchequer finances which await the new Minister for Finance
The figures confirm that borrowing for the year is set to come in way below projections as the pick-up in economic growth continues to benefit the Exchequer.
The Exchequer returns for August, published yesterday, show borrowing in the first eight months of 2004 was €243 million, down from €892 million in the same period last year. Tax revenues of €21.46 billion are running 12.4 per cent ahead of the same period in 2003, while spending growth of 5.3 per cent remains well below the 7 per cent target.
These trends have already led the Department of Finance to predict that Exchequer borrowing this year will be around €1.8 billion, which would be €1 billion below the Budget forecast. Some of the buoyancy is accounted for by more than €600 million which accrued to the Exchequer from the Revenue clampdown on offshore accounts but, stripping this out, tax revenues are running ahead of target.
The buoyant trend will allow the incoming Minister scope to index-link tax bands and tax credits as part of a tax package in the forthcoming Budget.
Last night in commentaries on the latest data, both Goodbody and Bloxham Stockbrokers predicted that even the revised Department forecasts are too pessimistic. Economists in both brokers forecast that, using the EU measure of general government borrowing, the Exchequer was actually likely to show a small surplus for the year.
The EU borrowing measure excludes the hefty State contribution to the National Pension Reserve Fund. When this is allowed for, analysts expect the total Exchequer borrowing requirement to be in deficit, though by less than the Department predicts.
Income tax revenues have been boosted by the Revenue schemes but, allowing for these, they are running more than 10 per cent ahead of 2003.
The strong property market continues to boost stamp duty, running 23 per cent ahead of 2003. VAT receipts - up 11 per cent - are also benefiting from the property market as well as a lift in consumer spending, while capital taxes are also well ahead of target.
However, corporation tax receipts continue to run below 2003 levels.
Spending continues to run below budget, though the Department suggested earlier in the year that timing factors were responsible for this. The most noticeable shortfall is in capital spending on major investment projects, which, at €2.22 billion, is running €170 million below 2003 levels, compared to a small budgeted increase.
The Labour Party finance spokeswoman, Ms Joan Burton TD, said the late-September Cabinet reshuffle was helping to delay spending on public transport, health and education.
Fine Gael's Mr Richard Bruton said the figures showed taxpayers were boosting Exchequer reserves by €2,500 per household following the Government's decision not to increase tax bands over the past two budgets.
