€1bn tax surge that lifts hopes of Budget 'giveback'
Published 03/09/2014 | 02:30
AN UNEXPECTED surge in tax revenue has given Finance Minister Michael Noonan an extra €1bn, raising hopes of a 'give-back' Budget for families.
The startling turnaround in fortunes is down to rising employment, a bounce in spending and improved company profits.
These all helped push the tax take 20pc ahead of target last month.
Mr Noonan collected €440m more than anticipated last month alone - meaning the overall tax take for the year is already €1bn ahead of target.
He was quick to promise Budget cuts "significantly less" than the €2.1bn forecast at the start of the year. Pressure is building for hard working families to feel the benefit in their pockets, as Ireland experiences something akin to a mini boom.
While Mr Noonan warned against a give-away Budget, his Cabinet colleagues were less cautious.
Tanaiste and Labour leader Joan Burton said: "I think we'll be looking to see what can be done for people on low and middle incomes, what can be done to accelerate the return to work, and to accelerate the position of credit for businesses."
The surge in tax take is the latest sign that the economy has begun to fire on all cylinders. About 4,000 jobs are being created by the private sector, prompting the country's largest recruitment company to post bumper profits yesterday.
Unemployment is at a five-year low and figures earlier this week showed manufacturing output at a 15-year high.
The net effect is that almost €25bn in taxes has been collected by the taxman so far, compared with the €24bn target.
Taoiseach Enda Kenny was quietly optimistic, but cautioned: "We still have an enormous debt. We are not in a position to write large cheques.
"What we are in a position to do is to continue to manage the economy in a way that continues to make Ireland really competitive, that makes us attractive for continued investment and as a location for the creation of jobs."
Ms Burton said that the economy was in recovery, but "that recovery has to be felt right throughout the country, particularly families and communities around the country.
"We know that it is stronger in Dublin and bigger towns and cities than it is in rural areas.
"Having been involved in three very difficult budgets, I have to say, it is thankfully a much more positive place to be in. But we have to be careful in approaching this Budget."
However, ministers are sure to spend the coming weeks jostling for favourable treatment on Budget day.
Education Minister Jan O'Sullivan all but demanded that there be no further cuts to her department's budget.
She told the Irish Independent that despite the improved economy, she had identified a number of "pressures".
"I will be fighting very strongly in relation to the education budget because we have pressures, particularly demographic pressures," she said. "Again we have increased numbers in our schools, we have increased demand for special needs teachers."
Meanwhile, the latest World Economic Forum Global Competitiveness Index gave Ireland its best ranking since 2009.
"Announcements like this make it easier for me in a very tangible way to go in to boardrooms in cities like Sydney and Melbourne, as well as Boston and Beijing, and try to persuade foreign companies to invest in Ireland," said Jobs Minister Richard Bruton during a trade mission to Australia.
Overall, the exchequer figures paint a picture of an economy where all the main pillars are improving. Almost €10.6bn has been received in income tax so far this year - or 1.7pc more than forecast and 9.1pc more than the same period last year. Around €7.4bn has been received from VAT, or 3.7pc more than planned and 8.5pc ahead of 2013.
A further €2.4bn came from corporation tax and €3.17bn from excise duty on drink, cigarettes and the like. Stamp duty from house sales contributed €646m. Separate figures said that an average of €300m was spent on residential property in Dublin every month in the first six months of the year as the market recovers.
Economists welcomed the figures and predicted a milder Budget. Goodbody Stockbroker economist Philip O'Sullivan said: "The previous €2bn target for new fiscal measures is clearly dead in the water."
One small setback was the €363m received from the local property tax which was €6m less than hoped. A bigger setback was the Government's continued inability to stem rising health spending.
Despite the figures, Mr Noonan warned against the idea of a giveaway budget, saying the State continues to borrow €800m a month to bridge the gap between income and outgoings. That leaves us with a deficit of €6.3bn so far this year.