State finances on track despite fall in consumer spending
CONSUMERS are continuing to spend less than the Government expected – but despite this, the State's finances remain on track.
VAT returns are about 3.5pc less than predicted in the year so far, according to August's Exchequer returns, suggesting that cash-strapped consumers remain reluctant to spend.
"If you look at VAT all the way through, there is softness there," a spokesman for the Department of Finance said.
"We have to look at it, and see if that trend is continuing. VAT is behind, that's a fact."
VAT was 27.7pc lower than expected last month – or down €65m – but the Department of Finance said August was not a major month for VAT collection, and that any bump in consumer spending, as a result of the summer good weather, would not actually filter through until next month, when September's returns are published.
As Finance Minister Michael Noonan prepares for October's Budget, the figures continue to paint a mixed bag about the economy, with excise duties down 4.1pc on target, implying we're smoking and drinking less than the Government expected – but there is increased house buying and stocks being traded on the Irish Stock Exchange.
These latest figures are the penultimate before the Budget is delivered in the Dail on October 15 and will factor into Mr Noonan's deliberations.
Some €191m has been collected from the property tax. The Government's target this year is €250m.
Overall, the Exchequer collected €23bn in taxes in the first eight months, €57m less than expected. During August, we spent €2.2bn more than we took in through taxes. Some €28bn was spent by government departments so far this year. Every department spent less than expected, except the Department of Arts, Heritage and the Gaeltacht, which was on target.
The Irish Tax Institute said the Exchequer returns would go some way towards helping the Government predict full-year tax returns in advance of the early Budget.
Mark Redmond, chief executive, said: "The 15 October Budget, which comes two months earlier than the usual December date, means that the Government will have to rely to some extent on forecasts of total tax revenues for the year.
"Next month's Exchequer Returns will be even more helpful as they will contain the VAT figures for the period July-August, which will be of particular interest in light of reports of an uplift in consumer spending due to the July heat wave."