PAYE hit as income tax soars by €1bn
WORKERS -- most of them PAYE -- paid almost €1bn more in income tax in the first five months of this year than for the corresponding period in 2011.
The huge increase of €937m contributed to a significant boost to the Government's coffers.
Around €386m more than forecast was collected in May alone, new Exchequer returns figures show.
The returns, which give a snapshot of a large portion of government finances, show the amount of taxes collected by the end of May came to €14.4bn.
Income tax, which came in 3.1pc ahead of forecasts, was an important driver of this increase.
Three of the big four taxes -- income tax, VAT and corporation tax -- were all ahead of expectations. Excise came in 2pc under target as people drink and smoke less.
While the better-than-expected returns are good news they will do little to strengthen the Government's hand in Europe other than underline the difference between Ireland and other struggling countries.
However, last night's Exchequer figures make it more likely that Finance Minister Michael Noonan will be able to stick to his plans to introduce a milder Budget in December than many of its recent predecssors.
Any slippage in revenue would have forced him to slash services further.
The positive Exchequer returns cap a difficult but largely successful month for the Government during which the fiscal compact referendum was passed and further signs that the economy is gaining strength emerged despite the worsening crisis in the rest of Europe.
However, the bad news was that spending on health and welfare was also higher than forecast.
And current expenditure, which includes public sector salaries and pensions, was also up, therefore wiping out some of the savings made in the public sector to date.
Unemployment has been steady or falling slightly for the past few months.
And the purchasing managers' index, possibly the best up-to-date indicator of economic growth, suggests that the economy expanded for the third straight month in May.
Exports are also holding up well. Ireland remains the third biggest exporter in the eurozone and the biggest when adjusted for population.
New unemployment figures will be published tomorrow but the latest estimates from the Central Statistics Office show there were 432,907 signing on the Live Register in May, a reduction of 8,040 from the same month last year.
News that Ireland is sticking to agreed targets despite a sharp slowdown in the rest of Europe means that our economy is now markedly different to those of Greece and Portugal which have failed to meet their commitments. Other countries in Europe including Italy and Spain have also been allowed to relax their austerity programmes as it became obvious that they could not meet their commitments.
Davy Stockbrokers said yesterday: "The ongoing performance of tax revenues is a reassuring sign that EU/IMF targets will be met."
One of the surprises in yesterday's figures was a fall in the cost of servicing the national debt. This was €111m less then expected at just under €4bn. Still, that means we are spending around €200m a week on interest repayments or twice what we were paying this time last year although the department warned that the figures are distorted by one-off factors.
The amount of income tax collected in the first five months of the year was 18.5pc or €937m more than the same period last year. That helps to explain why most people are feeling poorer but it is good news for the State.
The official figures show the budget deficit for the first five months of the year stands at €6.53bn compared to a deficit of €10.23bn in the same period last year, but most of the difference is due to accounting tricks which mean that the €3.1bn spent on the Anglo promissory note is not counted.
VAT receipts were up 2.3pc compared to the same period last year. That's slightly below the 2.6pc average that the Government expects for the year.