Wednesday 22 November 2017

State is €600m better off than was forecast

Stock photo
Stock photo
Donal O'Donovan

Donal O'Donovan

Higher than budgeted Garda overtime was the main area of overspending across Government in the first half of the year, as the State finances moved largely into line following a weaker-than-expected start to the year.

Exchequer returns for the six months to the end of June show tax income €110m behind the Budget forecast, but spending coming in below plan.

With the exception of the Department of Justice, spending across Government departments including Health was under budget for the first six months of the year, the figures show.

In Justice, a higher-than-expected Garda overtime bill pushed up the numbers.

Overall, the tax take in the first half of 2017 was €900m more than the same period last year, with higher VAT and corporate taxes helping make up for lower personal taxes, including USC.

Overall figures for 2017 are boosted by the sale of a quarter of the State's stake in AIB, which raised €3bn for the State coffers, earmarked for debt repayments.

The €9.045bn collected so far this year through income taxes are €214m behind profile - the expectation at Budget time, and expected to lag throughout the year, though by less than some earlier feared.

The shortfall reflects a problem in the model used to predict the impact of changes last year to the USC - a relatively new tax, rather than weakness in jobs growth, officials said.

The shortfall is likely to be around €80m for the full year.

Most other major tax headings are running well ahead of last year and ahead of profile. VAT income of €6.9bn for six months is 3pc more than expected. Corporate tax came in €20m ahead.

Vehicle registration tax (VRT) is also holding up despite a sharp fall in new car sales - because second hand UK imports, also subject to VRT, have made up the shortfall. Excise duty so far this year is €84m behind target, understood to be linked to early buying of tobacco by industry ahead of a planned shift over to plain packaging.

On the spending side, debt servicing costs of €3.7bn for the first six months of the year are among the State's biggest costs, but came in €89m lower than forecast as costly bonds were refinanced at cheaper rates.

Including the AIB sale, the second quarter of the year saw the Exchequer record a surplus of €2,485m. Stripping out AIB, the numbers are around €600m ahead of target.

Irish Independent

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