Exchequer likely to run cash surplus in 2016
State collects €45.6bn in tax in 2015, which is €3.3bn more than forecast at start of year
Tax revenue in 2015 was boosted by strong income tax returns, following increased employment and increased receipts from value added tax, which reflects increased consumer spending. The figures were also boosted by particularly strong corporation tax returns.
The exchequer is likely to run a cash surplus this year after a big rise in tax receipts in 2015 and once-off bank returns took the public finances close to balance in cash terms, Minister for Finance Michael Noonan said.
Mr Noonan was speaking after exchequer returns for 2015 showed the State collected €45.6 billion in tax last year, up €4.32 billion on 2014 and €3.3 billion more than the forecast at the start of 2015.
Government forecasts assume the State will collect €47.2 billion in tax in 2016 but the minister raised the prospect of a higher return. “I woudn’t be surprised if the tax take next year again exceeds the target,” Mr Noonan said.
The exchequer recorded a €62 million deficit in cash terms in 2015, compared to a €8.19 billion deficit in 2014.
According to the Department of Finance, the improvement in the deficit would be €5.2 billion when one-off transactions are stripped out of the figures. Such transactions included the redemption of AIB preference shares, which yielded €1.6 billion, and the sale of shares in Permanent TSB.
Tax revenue in 2015 was boosted by strong income tax returns, following increased employmentm and rising receipts from value added tax, which reflects consumer spending.
The figures were also boosted by particularly strong corporation tax returns, which rose 49 per cent in 2015 to reach €6.9 billion. The Government, whose forecasts for 2016 assume most of these payments are recurrent, expects to collect €6.6 billion in corporate tax this year.
Mr Noonan rejected notion that such provisions meant the Government had built the budget on a base of once-off taxation. “That’s not true,” he told reporters at the department.
“We’ve already built in a buffer in terms of a declining corporation tax take even though we don’t think it will decline very much.”
The figures overall were pretty good, he said. “When you take it into account that we’re due another €1.7 billion from AIB next July it’s quite clear that: not only will we balance next year, but we’ll probably be in surplus in cash terms.”
Under European and domestic fiscal rules, once-off transactions cannot be included when calculating the deficit.
The figures point to a budget deficit close to 1.5 per cent of gross domestic product at the end of 2015 – well below the original 2.7 per cent target, which itself was later revised down to 2.1 per cent.
The Government now assumes the end of 2016 deficit will come of between 0.7 per cent and 0.8 per cent of GDP, down from the 1.2 per cent target set out in the October budget. “We’re estimating now 0.75 per cent, that that will be the outturn at the end of 2016,” Mr Noonan said.
The minister said a balanced budget – net of once-off items – can be achieved in 2017, one year earlier than foreseen previously. “We had committed in the original spring statement last year to a balanced budget in 2018, it looks as if we’ll balance in 2017 now, which is a very big advance in the position.”
Minister for Public Expenditure Brendan Howlin said the 2015 figures were “truly remarkable” .
The overall deficit in 2010 was 32 per cent of GDP and the underlying deficit that year was 11 per cent of GDP, when bank recapitalisations were stripped from figures. In cash terms, the deficit then was €18.7 billion. “Now, five years leter, it’s €62 million,” Mr Howlin said .
“There were real concerns that the task we set ourselves – of having a deficit of less than 3 per cent of GDP by 2015 – was an impossible target to achieve.”
Net spending in 2015 was higher than forecast at €42.86 billion, but €271 million below the net estimate for the year after the inclusion of €1.5 billion in pre-budget supplementary estimates. “Any unexpended money reverts back,” Mr Howlin said.
Cumulative income tax receipts for the year were up €1.2 billion compared to 2014, €379 million ahead of forecast.
“This performance is consistent with the recovering labour market, employment growth and increases in the average weekly earnings as evidenced by the recent [quarterly national household survey] and earnings releases,” the Department of Finance said.
Income tax receipts in December reached €1.79 billion, €329 million ahead of the monthly target and €401 million more than December 2014.
“The performance of VAT in 2015 has been very encouraging with receipts finishing the year €170 million (1.4 per cent) ahead of target and on a year-on-year basis, receipts grew by 7.1 per cent (€791 million) in 2015,” the department said.
“These strong receipts are reflective of improved consumer confidence as evidenced by the performance of retail sales for the year to date.”
On the spending side, the department said net spending was €162 million below the revised forecast for 2015 set out in the budgetary projections in budget 2016 in mid-October.
Net voted current expenditure was €39.35 billion, €969 million above the original profile. The largest spending over profile was in health (€574 million), social protection (€275 million) and education.
Debt servicing costs for 2015 were €7.1 billion. On a like-for-like basis, the expenditure was down €473 on 2014 largely due to lower interest payments to the IMF after the early loan repayments.
“Interest expenditure in 2015 at €6,979 million was in line with the outturn projected in Budget 2016 last October. It was some €718 million or 9.3 per cent below the original Budget 2015 estimate of October 2014,” the department said.