July tax returns 3 per cent below target

Tax returns in July were almost 3 per cent lower than the Department of Finance had forecast, according to the latest Exchequer returns. All of the largest sources of tax revenues came in under target in the first month of the second half of the year.

Despite the weakness in July, total tax revenues in the first seven months of the cumulatively were a fraction above target. Taxpayers poured just over €21 billion into the exchquers coffers in the January-July period.

Compared to the same period a year earlier, the State took more than €700 million more from taxpayers in 2013.

Income tax recorded a shortfall of €69 million (or 5 per cent) in July, as compared to a target of €1,370 million. The Department said that the underperformance “can be primarily attributed to weaker than expected receipts from the Deposit Interest Retention Tax”.

Lower interest being earned on cash on deposit in banks is driving this trend.

More generally, the statement added, “encouragingly, PAYE and self-employed receipts are broadly on target and this is consistent with emerging labour market data”.

Income tax, which includes the Universal Social Charge, is the largest single source of revenue for the exchequer, raising more €8.6 billion in the first seven months of the year.

VAT receipts in July totalled €1,451 million, which represents a shortfall of €24 million (1.6 per cent) against target. VAT receipts are now €180 million (2.6 per cent) behind target after the first seven months of the year. This reflects weak retail sales activity since late last year.

Local Property Tax receipts of €52 million were received in July, bringing the total collected to end-July to €179 million.

Non-tax revenue, at €2,215 million to end-July was down €140 million (5.9 per cent) year-on-year. This was primarily driven by lower fees paid by the banks for their State guaranttee which ended in March.

On the spending side, net voted expenditure during the January-July period was €24,338 million, which is 2.6 per cent below profile . The figures represent a year-on-year decrease of 6 per cent or €1,561 million. The statement noted “encouragingly, all [Government]Departments are at or under profile”.

The cost of servicing the national debt, at €5,178 million in the first seven months of the year, was €614 million (13.4 per cent) higher than the corresponding period last year.

The Department said that “this year-on-year increase is reflective of the increase in stock of the national debt and the first payment on the IBRC related floating rate bonds”.

An Exchequer deficit of €5,167 million was recorded at end-July, which represents an improvement of €3,960 million compared to the first seven months of 2012.

It should be noted that the exchequer returns are a much narrower set of numbers than the EU-compatible, accruals-basedGeneral Government Budget figures.

It is the deficit as measured by the latter figures which counts most to the Irish State’s private and official lenders. That deficit is declining much more slowly than the cash-based Exchequer deficit.