Workers bear brunt as tax take on target
Published 04/08/2011 | 05:00
THE latest exchequer figures show that the amount of money being collected by the tax man remains on target despite signs elsewhere of a slowdown in the economy.
The total tax collected in the first seven months of the year was €18.6bn, or €263m more than forecast.
A 25pc increase in income tax receipts following the introduction of the Universal Social Charge in January was the main reason, but the taxes paid by companies also rose along with excise duties.
"This increase in tax figures against a backdrop of decreasing employment means the burden on those in the workforce is getting heavier," said Bernard Doherty of accountancy company Grant Thornton.
"The fact that the income tax take increased for the first six months of 2011, despite unemployment rates at 14.2pc, shows that the increased charges brought in last year's Budget are making themselves felt in people's payslips."
News that the tax take is slightly ahead of forecasts while expenditure is slightly behind target will come as a relief to the Government at a time when many other indicators from official and unofficial sources are flashing red.
The Central Bank warned late last week that the economy would contract for the fourth straight year. The Purchasing Managers' Index, which is probably the best up-to-date economic indicator, suggested earlier this week that the economy had contracted in June and again in July.
Last night's figures were welcomed by Fianna Fail spokesman on public expenditure Michael McGrath, who said it "confirms that much progress has been made to stabilise the public finances".
Despite being slightly better than forecast, the figures continue to reveal the scale of the Government's problems.
The exchequer deficit, or the difference between everything the State took in and had to pay out in the past seven months, was €18.9bn as the State bailed out banks, such as as EBS and Irish Nationwide, and began to pay for the bailout of Anglo Irish. The deficit was just €10.2bn at the same stage last year.
While some of these costs are one-offs, they dwarf the savings made elsewhere.
The cost of servicing the national debt was just over €3bn in the first seven months of the year or €750m more than in the same period in 2010.
The extra repayments alone are more than it costs to run any government department other than Education, Health, Justice or Social Welfare in the same period. Put another way, the State would have to abolish the departments of Defence, Children and Youth Affairs, Agriculture, Enterprise, Environment, Foreign Affairs, Finance and Communications and sack every civil servant to save the sort of money we spend on the interest payments on our debts.
The biggest drag on the finances is the continued underperformance of value added tax (VAT), which shows no signs of abating. With retail sales contracting for 40 straight months, Department of Finance officials will not have been too surprised to see that VAT returns continued to underperform in July.
By this stage in the year, officials had expected to take in almost €6.6bn. In fact, they have only taken in €6.4bn as nervous shoppers keep their wallets in their pockets.
The State is making sure that semi-state bodies play their part in keeping the exchequer figures marginally above target.
Bord na Mona paid €4.1m to the coffers after paying nothing last year. Dublin Port paid €16.5m or three times last year's contribution.
The amount collected from motoring fines has almost doubled to €13.3m, although this still remains a fraction of the Department of Transport's €746m budget.