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Thursday 22 March 2018

Tax receipt boost leads to budget deficit improvement

Ailish O’Hora

The Government got a lift today with higher-than-expected tax receipts contributing to a lower budget deficit, according to the latest exchequer return figures.

When bank recapitalisation costs are stripped out the budget deficit fell to €8bn compared with €10bn this time last year.

However, the exchequer deficit stood at €18.9bn at the end of July when the once-off payments of over €7.5bn to Anglo Irish Bank, EBS and Irish Nationwide are included.

Tax receipts were higher with gains in three of the “big four” taxes including income, corporation and excise duties.

Tax revenues stood at €18.6bn, or 8.6pc higher than this time last year, with the increase due to higher income tax receipts on strong returns from the Universal Service Change.

The only tax head not to improve was VAT reflecting the fact that consumers are still not spending.

Income tax was €160m ahead of target but excluding the benefits of earlier-than-expected DIRT (tax on deposit accounts) payments, both in April and July, it was slightly off.

Excise duties recorded a €67m surplus as did stamp duty.

But the stamp duty surplus is explained by earlier-than-expected payments in respect of the pension fund levy which was introduced to fund the Jobs Initiative.

Net expenditure was up just under 1pc at €25.7bn.

Total debt servicing was just over €3bn in the seven months.

Finance Minister Michael Noonan will present his first budget later this year and the latest figures show the economy is moving in the right direction ahead of a new review by the EU/IMF/ECB troika in October.

However, the improvements are being overshadowed by European debt fears as the cost of borrowing for Italy and Spain is leading towards 7pc or the level which they will no longer be able to borrow on international markets.

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