Monday 20 January 2020

Government paying €1bn a month in interest but still on track

Colm Kelpie and Ailish O'Hora

THE Government is spending almost €1bn a month paying off interest on the national debt, according to the Department of Finance.

The latest Exchequer returns also shows that we're drinking and smoking less than the Government expected and not spending as much. The State also took in less income tax than it projected in the first four months of the year.

By contrast, the figures suggested increased house buying and more shares being traded on the Irish Stock Exchange.

Overall, the State's finances remain on track.

Some €21m was paid in property tax last month, meaning the Government has taken in roughly 8pc of the €250m that it anticipates for this year.

That compares with the €5bn that has been brought in through income tax in the first four months of the year.

On spending, April's Exchequer returns show the bulk of the savings are coming from the capital side, which is used to build schools, roads and hospitals.

Some €14bn was spent by Government departments so far this year, compared to a budgeted €14.2bn. About €13.4bn went on current expenditure, which includes salaries. Capital spending was 9pc less than expected, while current spending was 2pc less.

Stockbrokers Davy said that overall revenues and taxes were hitting budget targets.

"Excluding corporation taxes, there is some unexpected weakness in some of the other tax headings, most notably value added taxes (VAT)," economist Conall MacCoille said.

"But lower-than-expected debt interest, and higher bank guarantee fees will help the budgetary arithmetic. Encouragingly, spending – even in the Department of Health – is being kept close to target in the first four months."

Key figures from the first four months of the year show:

• €5bn was taken in from income tax – down 1pc on projections.

• €3.5bn was brought in through VAT – down 3pc.

• Corporation tax was at €423m – up 40pc.

• Excise was at €1.4bn – down 3pc.

• Stamps brought in €366m – up 10pc.

• The budget deficit was €6.144bn as against deficit of €7.13bn in same period last year.

Pursued

Accountants Grant Thornton said people are still not spending.

"What is interesting is how many people have signed up to the property tax compared with the household charge," said tax partner Peter Vale.

"The fear of being pursued by the Revenue Commissioners is far greater than that presented by the local authorities."

Alan McQuaid of Merrion Stockbrokers said the deficit target for the end of the year of 7.4pc of GDP will be beaten.

Earlier this week, Finance Minister Michael Noonan admitted that the economy will expand less than he forecast in December's Budget but insisted it remains on track to produce jobs and meet EU debt targets.

Irish Independent

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