Good news for Government as tax returns on the up
Exchequer returns at the end of September show the Government tax take and spending plans are broadly in line with expectations boosted by income from the universal service charge and the tax levy.
Despite poorer-than-expected VAT figures, reflecting weak consumer spending, the Government remains on track to meet targets for year end.
The exchequer deficit now stands at €20.7bn but when the cost of bank related expenditure is excluded, the figure is over €3bn lower than the same time last year.
Tax revenues at the end of the month stood at €24.1bn, 7.8pc or €1.8bn higher, than last September.
Income tax is €147m above target, however, excluding the boost from earlier-than-expected DIRT payments in April and July the figure is 0.9pc off expectations after nine months of the year.
VAT recorded a shortfall again in the period to end September of €300m.
The stamp duty surplus is explained by payment of €457m from the levy on pension funds.
On the spending side, net voted capital expenditure is €793m or 26.7pc down.
The figures were welcomed by the Government ahead of the EU/IMF/ECB troika returning to Ireland next week to assess the progress of our austerity measures.
The implementation of these measures is already reflected in Ireland’s cost of borrowing which has dropped to below 8pc – this figure was as high as 14pc before any cost cutting and bank recapitalisations were introduced.
This has already distanced Ireland further from countries like Greece, which is hurtling towards default, and Portugal, which has also received bailout loans, that are being watched more closely by the markets.
While welcoming the figures, Minister for Finance Michael Noonan said that there is no room for complacency.
“The deficit in the public finances remains large, despite recent improvements, and it is crucial that we continue to reduce the gap between our revenues and expenditure in the coming years.”
Economists said today that speeding up the austerity process is an option for the government but only when more growth in the economy has been achieved.
“The main aim at this stage should be to protect growth so we can generate the revenues going forward to meet our budgetary targets rather than just implementing measures (irrespective of the damage to the economy) in the Budget in a crude mathematical exercise to get the budget deficit down as quickly as possible,” said Alan McQuaid, chief economist at Bloxham Stockbrokers.
“ The Minister can speed up the austerity process, if so desired, when the economy gets a bit more forward momentum (eg Budget 2013).”
Meanwhile, European finance chiefs have given final approval to tough EU budget rules designed to prevent another sovereign debt crisis in the area.
The new rules will mean slapping financial penalties on the 17 eurozone countries if they break EU debt and deficit limits of 60pc and 3pc of Gross Domestic Product respectively.
The27-nation bloc will also be watched carefully with the rules coming into law on January 1, next year, at the latest.