Tax revenues in first eight months slightly ahead of target

TAX REVENUES in the first eight months of the year were slightly ahead of target, according to exchequer returns published yesterday.

Despite this the exchequer deficit widened, reaching €20.4 billion. In the first eight months of 2010, the deficit was €12.1 billion.

All of the increased imbalance was a result of bank bailout costs, which amounted to in excess of €10 billion. Excluding bank-related spending, the deficit narrowed in the first eight months of the year compared to the same period a year earlier, according to Department of Finance figures.

A total of €20.5 billion in taxes was collected over the eight-month period, 1 per cent or €204 million ahead of targets set out in December last year.

Compared to the same period in 2010, total tax revenues were up 8.3 per cent, largely reflecting tax increases introduced in budget 2011.

In August, €1.9 billion in revenues were collected, an increase of just under 6.8 per cent compared to August 2010. This was below average for 2011.

VAT recorded a shortfall of 3.3 per cent over the first eight months, or €229 million below target. August was the third consecutive month in which VAT targets went unmet. It was also the third consecutive month that VAT revenues were lower than the corresponding month of 2010.

Falling VAT revenues reflect a weak domestic economy and low consumer confidence.

According to yesterday’s figures from the Department of Finance, three of the other four big tax streams that flow to the exchequer were ahead of target by the end of August.

Income tax was 1.6 per cent, or €131 million, ahead of target.

However, excluding the impact of earlier-than-expected Dirt payments in April and July, income tax was 1 per cent below target in August.

Compared to the first eight months of 2010, however, income tax receipts were up by 25 per cent. This large increase is the result of big increases in tax rates and accounting changes.

In the first eight months of the year corporation tax was €67 million, or 4 per cent, above target, while excise duties were €62 million ahead of target, a 2.1 per cent surplus. Compared to the same period of 2010, corporation tax was down by 4 per cent.

The exchequer figures do not include pay-related social insurance contributions as these do not accrue to the exchequer. PRSI is the second-largest source of Government revenue after income tax.

On the spending side, most Government departments reduced outlays in the first eight months of the year. But as the biggest budget departments – welfare, health and education – spent more than in 2010, total “voted departmental expenditure” rose to €29.2 billion, up from €29 billion last year.

The Department of Finance said yesterday that if accounting changes introduced in the 2011 budget are excluded, spending fell by 2.7 per cent year-on-year in the first eight months.