Shopping spree earns extra €3bn for State
Published 05/01/2016 | 02:30
A surge in consumer spending has helped pour €3bn more into the State's coffers than was predicted at the start of last year.
New figures to be released today will show forecasts set out by Finance Minister Michael Noonan as recently as Budget Day in October underestimated the tax to be collected in the final three months of the year alone by €1bn.
However, the figures come against a backdrop of international turmoil as weak economic data from China and heightened tensions in the Middle East wrought havoc on financial markets worldwide, and stock exchanges from Asia to the US crumbled.
Irish shares outperformed the rest of Europe, with the Iseq dropping just 1.28pc. In London, it was the worst new year start for the FTSE 100 in its 31-year history, while Germany's Dax Index dropped 4.3pc.
The Irish Independent understands the full-year Exchequer figures for 2015 will show that the country's finances are in the best shape since the Celtic Tiger boom years. The overall deficit for the year will come in at just €62m - compared with a figure of €8bn at the end of 2014.
Although the country still has substantial debts, the figures mean the Government is within touching distance of being able to claim the State's books are balanced.
The figures are somewhat "flattered" by a number of one-off transactions but even when they are excluded, tax revenues are €3bn ahead of target.
"Overall, when everything is factored in, the country is about €5bn better off than at the same stage 12 months ago," said a source.
The income from VAT, which is charged on the sale of goods or services, during the past year is in the region of
€12bn, or €800m more than in 2014.
"There have been no increases in tax so the fact there is €800m extra collected in VAT can only be down to one thing - and that's people spending money," said a source.
The news will come as a boost for Fine Gael and the Labour Party, who want to turn the upcoming General Election into a referendum on their management of the economy over the past five years.
The VAT figures do not factor in the estimated €5m an hour spent by shoppers in the run-up to Christmas as these returns are not made until later this month.
Sources last night also pointed out that the positive data comes ahead of workers' first pay-packet since Budget Day reductions in the much-hated Universal Social Charge (USC) came into effect on January 1.
"People will have more disposal income than they did last month and that should boost the economy even further," said one source.
Overall, the tax take for the month of December is €0.5bn ahead of where it was a year ago, with income tax and corporation tax said to be performing particularly well.
The Exchequer returns are now likely to feed into the election debate about how much scope the various parties see for tax cuts and spending increases. Just yesterday Tánaiste Joan Burton said the Labour Party was prepared to give tax breaks to everyone earning up to €120,000. Its manifesto will also commit to a tax freeze for every individual earning above that figure.
The Cabinet meets today for the first time since their Christmas break with Mr Noonan expected to update his colleagues on the Exchequer returns.
The minister spent Christmas in hospital where he underwent a number of medical procedures for an infection involving fluid in the chest area.
He will make his first public appearance since revealing his illness this afternoon when he hosts a joint press conference with Public Expenditure and Reform Minister Brendan Howlin to announce the Exchequer figures.
However, the ministers will also be closely monitoring global events after the Chinese stock market collapsed, sending reverberations around the world.
Another report of poor performance in the country's manufacturing sector sparked worries about the growth potential of the world's second largest economy.
And amid the market volatility, the top economist at the International Monetary Fund, Maury Obstfeld, warned China could spook investors.