Tax revenue running €548m ahead of target

Tax revenue for the first seven months of the year is now half a billion euro ahead of target, according to the latest exchequer returns.

The stronger-than-expected performance, if maintained until the Budget in October, should give Minister for Finance Michael Noonan greater scope for tax breaks.

The figures show total tax revenue stood at €22.4 billion at the end of the July, a 6.4 per cent increase on the same period last year, and €548 million or 2.5 per cent ahead of the department’s target.

Income tax, which is the biggest tax heading, generated €9.2 billion, was 7.6 per cent up on last year, and €54 million or 0.6 per cent ahead of profile for the period.

The higher income tax receipts reflected the greater number of people at work this year compared to last.

The figures show VAT, which reflects consumer spending, was also ahead of expectations.

The sales tax brought in €7.1 billion, which was 7.2 per cent up on last year, and €242 million or 3.4 per cent better than originally forecast.

Corporation tax receipts came in at €2.1 billion, 3.4 per cent ahead of profile, while excise duty was €2.8 billion, which was 5 per cent ahead of projections.

Overall, the exchequer deficit stood at €5.2 billion at the end of July, up marginally from €5.1 billion at this stage last year.

However, when the once off transactions, such as the sale of Irish life and the offload of so-called contingent convertible capital bonds in Bank of Ireland are excluded, the deficit this year has improved by €2.3 billion when compared to last year.

“The Exchequer returns for the first seven months of 2014 show a strong performance in terms of both tax and expenditure. Cumulative tax receipts are up €1.3 billion compared to the same period in 2013. This is further evidence that the recovery is taking hold across the economy,” Mr Noonan said.

“If this pattern continues in the second half of the year the Budget adjustment will be somewhat less than the €2 Billion originally planned,” he said.

On the spending side, the July figures show total net voted expenditure of €24.2 billion, which is €172 million, or 0.7 per cent, down on the same period last year, and €73 million less than forecast.

However, current expenditure is still running ahead of budget, primarily because of a €273 million or 3.9 per cent overrun in health.

Net voted current expenditure at €23,071 million is 0.1 per cent or €24 million above profile. This is driven by overspends in the Health Group which is €273 million (3.9 per cent ) over profile.

This is being partiallyoffset by underspends in several other departments, most notably social protection where spending is €121 million lower than profile.

On the basis of these figures, the Government is comfortably on course to hit its budget deficit target for 2014 of 4.8 per cent of gross domestic product.

The cost of serving the national debt to the exchequer was €5.1 billion so far this year, a decrease of €45 million or 0.9 per cent on last year. The reduction was largely down to timing factors, the department said.