Budget dilemma for Government as tax take €1.4bn ahead of forecast
Published 03/09/2015 | 02:30
The tax take was more than half a billion euro healthier than expected last month, with large gains in income tax and VAT.
The taxman collected about €1.4bn more than forecast so far this year, meaning the take for the entire year could end up close to €2bn healthier than thought in last October's Budget.
Exchequer Returns for August, the last before the intense horse trading that will proceed next month's Budget, show that €27.34bn has been collected in the year to date - 5.4pc higher than expected - with all categories doing better than predicted.
Income tax, the single biggest source of taxation, at €11.22bn, was €146m, or 1.3pc better than targeted. VAT, at €7.96bn, was €107m or 1.4pc healthier.
This reflects the recovering labour market as well as improving consumer demand, as unemployment drops, confidence among consumers rises and households spend more.
In April's Spring Economic Statement, it was predicted that the tax take this year could be around €1bn higher than anticipated in Budget 2015.
Now, with a number of experts forecasting the economy could grow by over 5pc this year and the jobless rate will fall further in the coming months, the Department of Finance is expecting the tax take could be closer to €2bn higher by the end of the year than expected.
The data confirms the pattern drawn by previous Exchequer releases, and comes on the back of positive economic reports.
In theory, the extra cash could give the Government even more wriggle room to play around with in Budget 2016 - the last before the General Election - but also make it politically more difficult to dampen expectations. Taoiseach Enda Kenny has pledged to be prudent and to not go beyond the €1.2bn-€1.5bn expansion promised in the Spring statement.
Finance Minister Michael Noonan said the data showed public finances are in a strong position ahead of Budget 2016.
"Overall, the tax performance for the first eight months of 2015 is ahead of expectations, with a very strong performance across all the major tax heads," he said.
"The tax take is ahead of profile and is up by 10pc or just under €2.5bn year-on-year. This is driven primarily by improvements in the underlying strength of the economy, job creation and the positive impact this is having on consumers and businesses."
Mr Noonan said the State was well on track to meet its targets this year. August was a particularly strong tax month, with income tax coming in 9.4pc ahead of profile, VAT was 10.6pc higher than profile, and corporation tax receipts were up a massive 200.1pc. The Department of Finance said the income tax improvement reflects jobs growth and a rise in weekly earnings, while the Corporation Tax over-performance for the year to date was described as being due primarily to improved trading.
The deficit - the gap between how much the State takes in and spends - at the end of August was €1.29bn, an improvement on the €6.33bn recorded in the same period last year.
The Government is well on its way to surpassing the deficit target for this year.
The Department of Finance said the improvement is driven by increased tax, non-tax receipts, reduced spending and a number of one-off transactions.
Without the one-off transactions, the improvement in the deficit would be around €3.5bn.
Indeed, the tax take for the year was 9.8pc higher last month than it was in August 2014, with income tax receipts up 6pc, VAT up 7.9pc and corporation tax up 38.1pc.
So far this year, of the smaller tax heads, stamp duties from share sales and house purchases are €86m, or 15.2pc, better than anticipated. Excise duties on alcohol, fuel and tobacco came in 0.7pc higher than planned.
On the spending front, net voted expenditure at €27.38bn was 1.1pc, or €297m, below profile and €130m lower in year-on-year terms.
Total debt servicing costs at the end of the month were €4.61bn, a drop of 6pc, reflecting the impact of the early loan repayments to the International Monetary Fund (IMF).
But so far this year, taxpayers have shelled out €4.52bn in debt interest payments. The Department said this was 8.1pc lower than planned, thanks to lower-than-expected costs on bond issuance as well as the faster pace of repayment for the IMF debt.