Tax revenues beat expectations

Tax revenues beat expectations once more in October, but a decline in both corporation and income tax during the month may be a cause for concern.

Spending was also ahead of targets, but a €2.9 billion deficit was largely due to a €1.3 billion debt interest payment and a contribution of €0.5 billion to the European Stability Mechanism (ESM).

The latest exchequer returns, published by the Department of Public Expenditure and Reform, reveal that tax revenues were up by 6.3 per cent in October compared with the same period in 2011.

Tax revenues stood at €28.4 billion for October, €1.7 billion, or 6.3 per cent ahead of the same period last year and €96 million (0.3 per cent) ahead of forecasts.

When adjusted for factors such as delayed corporation tax receipts, revenues show an increase of 4.3 per cent year-on-year.

Income tax - the largest source of tax revenue - was up by 11.3 per cent on the previous year, at €1.7 billion, or by 8.6 per cent on an adjusted basis.

This was €69 million (0.6 per cent) ahead of forecasts. However, returns showed a decline for the month of October. With November a critical month for self-employed returns, €2.5 billion is expected to be collected this month.

Similarly, corporation tax receipts also showed a decline in October, recording a shortfall of €225 million.

This was expected however, with close to €1.2 billion, or 30 per cent of the annual target, expected to be collected in November.

And over the ten month period to the end of October, corporation tax revenues are ahead of expectations by €26 million (1 per cent), at €2.7 billion, although on an adjusted basis, receipts are now down by 2.5 per cent on 2011.

Value added tax was again ahead of expectations in October, up by €286 million on 2011, or 3.5 per cent, and is €106 million (1.3 per cent) ahead of targets.

The fourth largest contributor to tax revenues, excise duties, failed to meet targets for the fourth consecutive month, with receipts €156 million (4.1 per cent) below expectations.

Elsewhere, stamp duty, capital gains tax, capital acquisitions tax and customs are slightly up on target.

On the spending side, total net voted expenditure, at €36.7 billion, exceeded the target by €88 million (0.2 per cent).

However, in year-on-year terms, it is 0.8 per cent, or €311 million lower than 2011.

Overspends were recorded in the Department of Social Protection (caused in large part by a PRSI shortfall of €289 million) and the Health Vote Group.

Overall, the Exchequer deficit stood at €14.1 billion at the end of October, down from €22.2 billion at the same point in 2011, largely due to the settlement of the IBRC promissory note with a government bond, and that the banking recapitalisation of July 2011 was not repeated.