Exchequer returns sharply down due to SEPA switch-over

Figures show tax take nearly €650 million less than expected last month

Tue, Feb 4, 2014, 17:21

The Government’s first set of exchequer returns for 2014 have been heavily distorted by the introduction of a new European-wide money transfer system.

The Department of Finance revealed today it did not receive about €650 million in taxes because of delays in the processing of direct debits linked to the implementation of the Single Euro Payment Area or SEPA.

The department insisted, however, the anomaly arose from a “technical timing issue” and that the money was still coming in, albeit later than usual.

To prove the point, it said €527 million had been collected on the first banking day of this month compared to €80 million on the same day last year.

Excluding the “SEPA effect” , it predicted tax revenue for January would be up 5 per cent year-on-year.

Today’s figures showed the Revenue collected about €3.1 billion in taxes last month, a decrease of €644 million or 17.1 per cent on the same month of last year.

VAT receipts - which should have reflected the busy Christmas shopping period - totalled €1.4 billion, which was down 21.4 per cent or €372 million on the same month last year.

The other big tax category, income tax, raised €1.2 billion in January, which was 11 per cent or €151 million down on the same month last year.

The irregularities caused by SEPA are likely to see February’s exchequer numbers come in significantly ahead of profile.

Corporation tax receipts amounted to €7 million last month, which was 60.8 per cent on the €11 million collected in January last year.

Of the four main tax streams, only excise duty came in ahead of last year, with returns of €342 million for the month, up €24 million or 7.4 per cent on an annual basis. This was linked to increased car sales, resulting in higher VRT receipts for the Revenue.

The figures showed the exchequer deficit at the end of January stood at €1.14 billion, compared with a surplus of €704 million at the same stage last year.

Last year’s figure was, however, aided by the sale of contingent convertible debt notes in Bank of Ireland worth €1 billion, which t was a one-off transaction.

January’s figures were also hit by money from the levy on health insurance premiums, which usually goes into the Exchequer, now going directly into the Risk Equalisation Fund, the department said.

On the spending side, net voted expenditure was running €127 million ahead of January last year, which reflected an additional weekly payday in January this year and the delay of PRSI receipts for January as a result of the SEPA issue again.

The SEPA payment system, which applies to the EU and five other countries - Norway, Liechtenstein, Iceland, Switzerland and Monaco, is aimed at speeding up cross-border credit transfers and debit payments.

The Department said that beyond the initial roll-out phase, a standard four banking days would be needed to process the transactions.

While the majority of businesses and financial institutions are now compliant , the European Commission recently extended the original February 1st SEPA compliance deadline to August 1st .