Boost for exchequer as tax revenues up more than 5%

The State’s public finances are continuing to improve with the latest official figures showing tax revenue ahead of projections for the first four months of the year, while spending is lower than forecast.

The exchequer returns published today show tax revenue of €11.5 billion, which is €612 million, or 5.6 per cent, up on last year, and €222 million or 2 per cent higher than forecast.

Income tax, which is the biggest tax heading, generated €5.4 billion, is €362 million or 7.2 per cent up on last year, and €106 million or 2 per cent ahead of profile for this year.

Department of Finance officials said higher income tax receipts reflected improved conditions in the labour market, which has seen unemployment fall from its 2012-peak of 15.1 per cent to 11.7 per cent this year.

On the downside, the long-anticipated recovery in consumer spending appears not to have materialised as evidenced by a worse-than-expected VAT intake.

The sales tax generated €3.65 billion for Government coffers, which was €177 million or 5.1 per cent up on last year but crucially €51 million or 1.4 per cent lower than forecast.

Excise was €1.5 billion, which was 6.2 per cent up on the year and €82 million or 5.8 per cent ahead of projections.

The better-than-expected excise receipts were to a rise in new car sales.

The department also revealed that approximately €120 million of income tax taken in during February and March was wrongly classified as VAT, falsely inflating the performance of the retail sector.

Last month, the department said only €101 million had been mistakenly submitted as VAT and only during March.

The department said the Central Bank and the Revenue Commissioners had investigated the issue, and had put in place processes “to mitigate the possibility of this happening again”.

It also emphasised that the overall tax collection for the period had been unaffected by the errors.

On the spending side, the April figures show total net voted expenditure of €13.65 billion, which is €315 million, or 2.3 per cent, down on the same period last year, and €167 million less than forecast.

According to the department, the main drivers behind this improvement were reduced guarantee pay-outs, increased tax revenues and a reduction in net voted expenditure.

On the basis of these figures, the Government is comfortably on track to hit its troika-agreed deficit target for the year of 4.8 per cent of gross domestic product.

The cost of serving the national debt to the exchequer was €3.7 billion so far this year, a decrease of €256 million or 6.5 per cent on last year.