independent

Monday 21 April 2014

State coffers €520m ahead as November tax take soars

Finance Minister Michael Noonan

IRELAND'S fragile economic recovery has been given a major boost, with November's tax returns coming in more than half a billion euro up on the same month last year.

The surge in stamp duty, income tax and VAT repayments made for a bumper month for the Government, as it finalises plans to exit the EU-IMF bailout.

The November returns were also the first set of figures to come out after the Coalition's seventh austerity Budget in a row.

They include annual tax returns for most self-employed workers such as small business owners and farmers.

The Exchequer collected €520m more in November than it did in the same month last year as receipts from income tax rose 7.7pc and those from VAT jumped 9.5pc – this means that people are finally starting to loosen the purse strings and spend again.

Receipts from stamp duty surged 24.5pc as house prices rebounded in some areas and the number of transactions increased.

The Exchequer figures have been improving steadily in the last few months after a shaky start to the year.

Yesterday's returns suggest the Government is set to comfortably beat its Budget 2013 deficit target of 7.5pc of economic output.

The surge in income tax has almost certainly been helped by the recent declines in unemployment as well as rising fortunes for some self-employed people and companies.

Another report showed yesterday that turnover at almost three-quarters of small and medium-sized companies has been stable or improved in the past six months.

"This is by some distance the strongest set of Exchequer figures produced this year," said Peter Vale, a tax partner at Grant Thornton.

"We are finally seeing positive employment and earnings growth translating into increased activity in the domestic economy.

"People have the confidence to divert savings to spending, which should give hope to retailers that spending through the holiday period will be strong."

Making up for weak tax takes earlier in the year, the Government's finances are now almost bang on target thanks to the late surge, and the State is on track to exit the bailout later this month without missing debt targets.

Some €34.97bn was paid in tax in the first 11 months of the year.

That's 0.6pc more than Finance Minister Michael Noonan targeted in last December's Budget.

November is an important month for the Exchequer as companies pay around one-quarter of all their taxes while many self-employed and farmers also file returns, which means that income tax returns are almost twice the normal monthly average. November also usually has high VAT receipts.

The figures hide overspending in the Department of Health, which is failing to meet its budget targets. Gross current expenditure in health is now €54m above the Budget 2013 plans.

Spending on salaries and other day-to-day spending is now €171m – or 1.5pc – above target. As in previous years, the department is slashing spending on buildings and equipment, which is 22.3pc below target.

Total tax take in the 11 months to November was 3.1pc higher than predicted a year ago.

The deficit for the first nine months of last year was €12.97bn compared with €8.58bn in the same period this year. While there have been some recent setbacks on the jobs front, unemployment is falling. Last week's unemployment figures showed that 58,000 extra people were now back in work.

Software giant Microsoft said yesterday that it will create 380 temporary construction jobs as it expands a data centre for cloud computing in Dublin.

AWAKENS

Stamp duty, while still a small part of the overall tax take, has almost certainly been helped by recent price rises and an increase in the number of transactions as the moribund property market slowly awakens from its slumber and some parts of the capital report soaring prices.

Rising investment in the stock markets has also helped.

While most economic data has been good lately, there are signs that some parts of the economy may still be struggling.

Consumer sentiment dipped last month according to separate figures released yesterday, as the ongoing squeeze on household finances hit the confidence of consumers. Consumer sentiment fell to 71 in November from 76.2 in October.

"This is a pattern that highlights the tentative nature of the turnaround as it is being felt by the average Irish consumer," said KBC Bank economist Austin Hughes.

Thomas Molloy Group Business Editor

Irish Independent

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