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Sunday 21 September 2014

Recovery takes hold with tax take €550m ahead of target

Published 06/08/2014 | 00:00

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Finance Minister Michael Noonan

The state's finances are more than half a billion euro ahead of target for the first seven months of the year.

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Income tax and Vat receipts are both better than expected, while the deficit is almost €800m smaller than predicted at the Budget.

Finance Minister Michael Noonan has again promised a softer budget if the tax trend continues.

There are just two more set of Exchequer returns until the minister delivers Budget 2015 in the Dail on 14 October.

"The Exchequer returns for the first seven months of 2014 show a strong performance in terms of both tax and expenditure," he said.

"This is further evidence that the recovery is taking hold across the economy.

"If this pattern continues in the second half of the year the Budget adjustment will be somewhat less than the €2bn originally planned."

The latest Exchequer Returns show public spending is below target, but overruns in Health remains an issue, running €273m over-Budget.

Income tax totalled €9.25bn to the end of July - up 7.6pc on the same period last year and 0.6pc better than targeted.

Vat receipts totalled €7.1bn - up 7.2pc on the same period in 2013 and 3.5pc better than expected.

Excise duties at €2.8bn are 5pc ahead of target for the first seven months of the year, but were 4.4pc below the monthly target.

Despite the resurgent property sector in Dublin and the jump in prices, stamp duties, at €438m, are down 23pc year-on-year, but are almost exactly on target so far this year.

Overall, the tax take is 2.5pc or €548m higher than expected so far this year.

Public spending is lower than expected, but expenditure in Health is €273m over budget. This is offset by under-spends in most other departments, including the Department of Social Protection, where spending is €121m lower than target. The Department of Transport, Tourism and Sport is €44m, or 7.7pc, over budget, while Agriculture is €17m over.

The Exchequer deficit is at €5.18bn - an improvement of €798m on what was predicted in the Budget, thanks to the increased tax take and a reduction in the amount being spent on interest payments.

Capital spending - which includes building costs - totalled €1.1bn for the first seven months - down 2.1pc year-on -year and 8.1pc below target.

Current spending - which includes public sector wages - was €23.1bn and is roughly on target.

Accountants Grant Thornton said the fact that Vat was better than hoped signalled people were spending and consumer confidence was on the up.

"Taxpayers are likely to see some respite in their annual tax bills in the budget, possibly through an increase in tax credits or a widening of the tax bands," said Grant Thornton's Peter Vale.

"While any such adjustment will still leave taxpayers considerably worse off versus their position in 2007, a decrease in their monthly tax bill in the region of €50 per month could be expected."

Specialist bank Investec said the numbers will fuel calls for a much easier Budget.

The Irish Independent reported this week that a property tax freeze could be on the cards ahead of the Budget, with ministers weighing up whether to announce a property tax freeze in Budget 2015 to give people "clarity" about what tax bills they're facing. Property prices are rising at the highest rate on record which means that, without a freeze, homeowners would pay substantially larger property tax bills when houses are revalued in 2016.

The move would offer some respite to families left reeling from a raft of new charges and taxes introduced over recent years.

Irish Independent

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