€500m Exchequer boost could ease cutbacks in Budget
Published 03/07/2014 | 02:30
A RISE in consumer spending and employment has helped give the Exchequer a half-a-billion-euro boost.
This means a softer-than-expected Budget may be on the cards as tax revenues are better than planned.
The total tax take was €18.47bn by the end of June – up 4.9pc on the same period last year.
VAT was one of the star performers, bringing in about €113m more than thought in the first six months of the year.
Income tax was up almost 1pc on the target, reflecting the improving labour market, while the turnaround in the property market in Dublin is also starting to show in tax receipts.
Finance Minister Michael Noonan and Public Expenditure Minister Brendan Howlin said the figures represent a solid performance.
"Tax revenues are growing and expenditure on public services is within budget," they said.
Mr Noonan has said he believes that a crucial EU target to cut the deficit by next year can be secured by doing less than the planned €2bn adjustment in the Budget.
But the European Commission, International Monetary Fund and Fiscal Advisory Council have all urged the Government to stick with the €2bn figure, arguing it would give some leeway.
About €7.8bn was taken in via income tax in the first six months, 0.8pc better than expected. But the figure for June was about €50m lower than hoped. The department said the figures are reflective of the improving jobs market and dismissed the drop in June as simply one month's figures.
VAT was up 2.1pc on what was expected signalling people are spending again but corporation tax was 9.4pc lower than hoped, and down 27.7pc in June.
However, the Department of Finance blamed this on delays caused by the new European payments system SEPA, which came into effect earlier this year.
It said the shortfall is already being made up, with almost €285m received this week, which will be recorded in July's figures.
Stamp duties are €51m better than hoped, with €30m of that due to activity in the property market.
Spending remains under control, and is down 2.1pc year-on-year. However, the Department of Health was €206m over target, while Social Protection was €129m less than had been forecast for this time of year.
Stockbrokers Davy estimated that the Exchequer balance is around €1bn better that expected for the first half of the year, or approximately 0.6pc of the value of the economy. It estimated the Budget adjustment could be halved to around €1bn.
Merrion Stockbrokers said if all goes to plan, the Budget adjustment could be lower than the €2bn.